Bank of England Announcement (8th May 2025)

While cutting interest rates from 4.50% to 4.25% today, the Bank of England poured some cold water on the markets’ expectations that it is going to speed up the pace of rate cuts. As it happens, we no longer think the Bank will slow the pace of rate cuts, so we have added in one more 25bps rate cut to our forecast for this year, taking rates down to 3.75%. Moreover, the risks to our view that rates will fall to 3.50% next year lie to the downside, although we doubt the Bank will cut rates more quickly than 0.25% per quarter.