Goldman Sachs sees BoE raising rate in February 2027

Goldman Sachs Forecasts Bank of England Rate Hike for February 2027

Goldman Sachs Updates Interest Rate Outlook

Nov 2 (Reuters) - Goldman Sachs said it now expects the Bank of England to raise interest rates by 25 basis points in February, in addition to its forecast for a quarter-point hike next week, citing higher energy prices and stronger economic data.

The Bank of England, which meets on November 5, is widely expected to raise interest rates by 25 basis points, with money markets pricing in an approximately 92% probability of such a move, according to LSEG data.

Key Factors Influencing the Forecast

Here are some details:

Inflation Risks and Energy Prices

• The Bank of England is keen to avoid repeating its past misjudgment of inflation risks as energy prices remain elevated, though unlike the last inflation shock, the US Federal Reserve and European Central Bank have already moved ahead with rate hikes

Rate Hike Timeline

• A hike would mark the central bank's first rate increase since 2023

Policy Guidance and Future Projections

• Goldman Sachs expects BOE to leave its policy guidance unchanged, reiterating that policymakers stand ready to act if needed to return inflation to target

December and February Rate Expectations

• While the brokerage still forecasts no change in rates in December, it now views a February rate hike as the more likely outcome, it said late on Friday

Long-Term Rate Path

• "We instead expect that the Committee will remain on hold at 4.25% throughout the middle of next year before cutting at a quarterly pace from 2027Q4 to an unchanged 3.25% terminal rate," it added

Reporting Credits

(Reporting by Kanishka Ajmera in Bengaluru; Editing by Nivedita Bhattacharjee)