BofA update shows where active managers are putting money
Investing.com -- Bank of America (NYSE:BAC) (BofA) has revised its Bank of England interest rate forecast, now expecting a slower pace of cuts through 2026 rather than an acceleration in the second half of this year.
The bank now anticipates quarterly rate cuts in August and November 2025, followed by a final reduction in February 2026, maintaining its terminal rate projection of 3.5%.
This represents a change from its previous forecast of cuts in August, September, and November 2025.
According to BofA, recent economic data suggests the U.K. labor market is not weakening as significantly as previously thought.
While the labor market continues to soften, pay growth is slowing, and growth data remains weak - conditions that warrant further cuts beginning in August - the bank believes the data isn’t weak enough to justify faster rate reductions.
The bank cited stronger-than-expected inflation data and upward revisions to recent payroll figures as key factors in its revised outlook. Forward-looking indicators point to a mild improvement in growth dynamics, though they remain weak overall.
BofA has also raised its headline inflation forecast for 2025 from 3.1% to 3.2%, with inflation now expected to peak at 3.7% in September, higher than previously anticipated.
In its rates strategy, BofA has shifted to a neutral stance on November MPC-dated Sonia, seeing limited potential for further performance.
The bank also expressed stronger conviction that 1-year RPI should be higher relative to 2-year RPI, noting that unlike the Eurozone’s rapid path to its inflation target, the UK faces a "slow grind" toward its goal.