MNI BRIEF: BOE To Cut Only Once More In 2025 -NIESR
MNI (LONDON) - The Bank of England will make only one further 25bp cut in 2025 and another in 2026, with Bank Rate troughing at 4.0%, according to the National Institute of Economic and Social Research.
In an updated quarterly forecast round, NIESR projected that inflation would hit 3.2% in January and peak at 2.8% this quarter and average 2.4% for the year before dropping back to the 2% target with the BOE only having room for two more rate cuts.
Expansionary fiscal policy and global dis-saving are seen pushing neutral rate, r*, higher, and a mix of elevated inflation and higher wage growth are predicted to result in less than monetary easing than markets are pricing in, with the Bank's latest survey finding market participants put the longer-run average for Bank Rate at 3-3.5% rather than 4%. (see MNI POLICY: BOE Looks Set To Edge Up Neutral Rate Estimate)
The NIESR forecasts are rosier for the Treasury, as they show the government just meeting its balanced budget goal.