Goldman Sachs has again revised its outlook for Bank of England (BoE) rate cuts, pushing expectations later amid concerns that rising energy prices will feed through into higher inflation across Europe. The investment bank now foresees three 25-basis-point cuts in July and November this year, followed by a single 25-basis-point reduction in February 2027.
While a rate cut at the BoE's April 30 meeting remains within the realm of possibility if the recent energy shock eases rapidly, Goldman Sachs said policymakers are more likely to hold off until they see clearer incoming data. That caution reflects the bank's assessment of how higher energy costs could sustain inflation and prompt the Monetary Policy Committee (MPC) to delay easing.
The shift in timing is not unique to Goldman Sachs. Standard Chartered and Morgan Stanley have also pushed back their projections for BoE easing, now anticipating the central bank's first rate cut in the second quarter. Both banks cited elevated inflation risks tied to energy price spikes linked to the Middle East conflict as a reason for revising their schedules.
Despite the later start to easing, Goldman Sachs still expects the bank rate to reach 3% by early 2027. The brokerage stressed, however, that alternative outcomes remain possible: in an adverse scenario the MPC would deliver only one cut this year, and if conditions deteriorate further it could deliver none.
The near-term path of policy therefore remains conditional on energy markets and incoming inflation data. Policymakers are weighing the possibility of a quick resolution to the energy shock against the risk that sustained higher energy costs will keep price pressures elevated across the region, encouraging the MPC to err on the side of patience.
Contextual implications
- Goldman Sachs' updated timetable reflects an expectation of delayed monetary easing driven by energy-related inflationary pressures in Europe.
- Other major banks have made parallel adjustments, signaling a broader recalibration of BoE cut expectations in financial markets.
- The BoE's decision-making window remains sensitive to short-term moves in energy prices and the clarity of incoming inflation data.