Published by Global Banking & Finance Review®
Posted on July 18, 2025
2 min readLast updated: January 22, 2026
Wall Street firms retract BoE rate cut calls as UK inflation hits 3.6%. Labour market shows resilience, impacting monetary policy expectations.
(Reuters) -Major Wall Street brokerages have withdrawn their expectations for a September interest rate cut by the Bank of England, as inflation remains sticky and the labour market resilient.
Britain's annual rate of consumer price inflation unexpectedly rose to its highest in over a year at 3.6% in June, data showed on Wednesday. A Reuters poll of economists had expected inflation to remain unchanged at May's reading of 3.4%.
Pay growth slowed and employee numbers dropped further in May, but the cooling in the labour market which had alarmed some policymakers appeared less acute than previous data had suggested, official figures showed this week.
This led to BofA Global Research, Citigroup, Morgan Stanley and Goldman Sachs pulling back their expectations for a September rate cut on Thursday.
"The data is not weakening enough for the BoE to accelerate cuts," BofA said.
Morgan Stanley said that the BoE's "path beyond remains cautious and data-dependent."
Both BofA and Morgan Stanley forecast the central bank to reduce policy rates twice each in August and November this year, while Goldman Sachs expects sequential cuts from November through March 2026 to a 3% level.
The UK's benchmark bank rate currently stands at 4.25%.
Citigroup expects BoE to cut rates thrice this year, in August, November and December.
Money markets are pricing in a total of 48.6 basis points of BoE rate cuts by the year-end, with a 77.3% probability of a 25 basis point move in August, according to LSEG data.
BoE is set to meet next on August 7.
(Reporting by Rashika Singh and Siddarth S in Bengaluru; Editing by Mrigank Dhaniwala)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
Monetary policy refers to the actions taken by a country's central bank to control the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation, consumption, growth, and liquidity.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the principal. They are influenced by monetary policy and economic conditions.
The Bank of England is the central bank of the United Kingdom, responsible for issuing currency, managing monetary policy, and overseeing financial stability.
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