Bank of America has revised its forecast for the Bank of England’s rate cuts. They now predict two further cuts in August and November, withdrawing their previous prediction for September. <\/p>\n
This revision follows the earlier adjustments made by Goldman Sachs and Citi. Both had also retracted expectations for a September rate cut. BofA anticipates the Bank of England’s terminal rate to settle at 3.50%.<\/p>\n
Unlike its peers, BofA expects the next rate cut to occur only in February of the following year. They foresee no consecutive rate cuts from the Bank of England after November.<\/p>\n
We see that major banks, now including Bank of America, are removing their forecasts for a September interest rate reduction from the Bank of England. This adjustment aligns with the changing sentiment also seen at firms like Goldman Sachs and Citi. The consensus is now shifting towards fewer and more spaced-out cuts this year.<\/p>\n
This change in outlook is driven by recent economic data, as UK services inflation remained stubbornly high at 5.7% in May, even as the headline rate fell to the 2% target. Stubborn price pressures, along with annual wage growth still running near 6%, are making policymakers cautious. This makes a rapid series of cuts seem much less likely.<\/p>\n
Derivative markets are already reacting to this new reality, with the implied probability of an August rate cut now falling below 50% and a September move almost entirely priced out. We should therefore adjust positions in SONIA futures and options to reflect a “higher-for-longer” rate environment through the autumn. These instruments should be repriced to show the first full 25-basis-point cut not occurring until the November meeting.<\/p>\n
Given this backdrop, we should consider strategies that profit from this expected pause, such as selling interest rate options that would only pay out if a September cut occurred. Historically, central banks often engage in “stop-start” easing cycles when underlying inflation proves more persistent than expected. This pattern supports the forecast from the American bank for a long pause after a potential November move until February of next year.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Bank of America now expects rate cuts in August and November, dropping its previous September forecast.<\/p>\n","protected":false},"author":62,"featured_media":17035,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-26722","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/26722","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=26722"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/26722\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17035"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=26722"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=26722"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=26722"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}