BofA and Deutsche Bank expect BoE rate cut 

Investing.com -- The Bank of England (BoE) is expected to deliver a rate cut at its upcoming meeting, with some analysts anticipating that certain policymakers may push for a deeper reduction amid economic pressures.

According to BofA analysts on Thursday, the BoE will cut the rate by 25 basis points to 4.25%, with a majority vote of 8-1. The sole dissenting vote, expected from policymaker Dhingra, is likely to advocate for a more aggressive 50 basis point cut.

BofA suggests that a combination of improving domestic inflation, declining energy costs, and the potential economic risks posed by tariffs justifies the rate reduction.

Furthermore, they anticipate a total of four rate cuts throughout the year, with the possibility of a more dovish voting pattern emerging.

BofA also projects that the BoE will present lowered quarterly growth forecasts from Q2 onwards, reflecting the negative impact of U.S. tariffs, estimated to be around a 40 basis point hit to growth.

Despite this, BofA expects an upgrade in 2025 growth forecasts from 0.7% to 0.9%, while predicting a downward revision for 2026 from 1.5% to 1.2%.

Inflation forecasts are also anticipated to be reduced, with 2025 Q2 estimates dropping from 3.5% to 3.2%, and a peak in Q3 of this year from 3.7% to 3.4%.

Two-year and three-year inflation forecasts are also expected to be adjusted downward.

Deutsche Bank (ETR:DBKGn) on Friday shared a similar outlook, emphasizing the global trade war’s effects on the U.K. economy.

They predict a quarter-point rate cut by the BoE, with two Monetary Policy Committee (MPC) members, Dhingra and Mann, possibly advocating for a half-point reduction.

Deutsche Bank also expects significant revisions to the MPC’s growth and inflation forecasts, including a lower GDP growth projection for 2026 and a CPI forecast of 1.8% for Q2 of 2028.

They suggest that the MPC will modify its forward guidance, possibly abandoning the term ’gradual’ in favor of a more flexible approach based on economic conditions.

Deutsche Bank anticipates three additional rate cuts in 2028, with a potential acceleration as early as August.

Both firms agree that the rate market is pricing in a 25 basis point cut, and they will be watching for any indications of the BoE’s pace of quantitative tightening from October.

Additionally, currency markets are expected to focus on the details of the inflation report and voting patterns for future direction.

With the cut already anticipated, the extent to which the BoE can influence rate pricing will be crucial.