Finance
Goldman Sachs Expects Prolonged BoE Pause, Sees Next Rate Cut in 2027
Published by Global Banking & Finance Review®
Posted on March 20, 2026
2 min readLast updated: March 20, 2026
Quick Summary
Goldman Sachs now expects the Bank of England to delay rate cuts until 2027, not July, aiming for a 3% terminal rate. The BoE held rates at 3.75% and flagged elevated inflation risks from surging Middle East energy prices.
Goldman Sachs Sees Next Bank of England Rate Cut Delayed Until 2027 Amid Risks
Goldman Sachs Revises Bank of England Rate Cut Forecast
Central Bank Holds Rates Steady Amid Inflation Concerns
March 20 (Reuters) - Goldman Sachs has pushed back its forecast for Bank of England interest rate cuts to 2027, after the central bank kept rates steady and flagged inflation risks from the war in the Middle East.
Previous Expectations and New Outlook
Goldman had earlier expected the BoE to begin cutting rates on a quarterly basis starting in July, but now anticipates a slower pace of reductions from next year to reach a 3% terminal rate, it said in a note on Thursday.
Inflation Projections and Policy Vigilance
The BoE kept the Bank Rate steady at 3.75% on Thursday and said inflation could climb to around 3.5% over the next two quarters, adding it remains vigilant to the risk of higher inflation expectations becoming embedded in the economy.
Risks and Market Reactions
Potential for Near-Term Rate Hikes
The brokerage reiterated a significant risk of a near-term rate hike - potentially as early as the April meeting - if global energy prices continue to climb.
Global Factors Impacting Policy
The Middle East war and the effective closure of the Strait of Hormuz have led to a surge in oil prices, raising fresh inflation risks across Europe and prompting major brokerages, including J.P.Morgan and Morgan Stanley, to delay their expectations for policy easing.
(Reporting by Joel Jose in Bengaluru; Editing by Sonia Cheema)
Key Takeaways
- •Goldman Sachs previously projected quarterly BoE rate cuts beginning July 2026 but has pushed that to 2027, slowing descent to a 3% terminal rate.
- •The BoE left its Bank Rate at 3.75% on March 20, 2026, warning inflation could rise to around 3.5% over the next two quarters and cautioning that another hike could come if energy prices escalate.
- •The war in the Middle East—particularly disruptions through the Strait of Hormuz—has fueled a surge in oil and LNG prices, prompting broader policy easing delays by major banks and heightening inflation risks across Europe.
Frequently Asked Questions about Goldman Sachs expects prolonged BoE pause, sees next rate cut in 2027
1When does Goldman Sachs expect the Bank of England to cut interest rates?
Goldman Sachs expects the next Bank of England rate cut to occur in 2027.
2Why has the Bank of England postponed rate cuts?
The BoE has delayed rate cuts due to inflation risks stemming from the Middle East war and rising global energy prices.
3What is the current Bank of England interest rate?
The Bank of England kept its Bank Rate steady at 3.75%.
4Is there a risk of a Bank of England rate hike soon?
Yes, Goldman Sachs said there is a significant risk of a near-term rate hike if global energy prices keep rising.
5How have other brokerages responded to the inflation outlook?
J.P.Morgan and Morgan Stanley have also delayed their expectations for policy easing in response to rising inflation risks.