September 18 is expected to remain unchanged, and differences in expectations for interest rate cuts are intensifying

XM Forex APP News - According to a Reuters survey from September 8 to 11, 67 economists unanimously expect the Bank of England (BoE) to maintain the benchmark interest rate at 4.00% on September 18. However, there are significant differences in market views on future interest rate cuts. Most economists (42-digit) expect the Bank of England to cut interest rates by 25 basis points in the fourth quarter, while a few (3-digit) predict a 50 basis point cut. But more than 30% (22) of respondents believe that interest rates will remain unchanged for the rest of the year, a significant increase from 15% surveyed in August, reflecting market concerns about continued high inflation. After the UK's inflation rate reached a peak of more than 11% in 2022, it once fell to the central bank's target of 2% last year, but has recently risen to nearly 4%. It is expected that the inflation rate will reach 4% in September and may continue to rise until mid-2027 before returning to the target level. Bank of England Governor Andrew Bailey recently said that the rate of interest rate cuts is still unclear given inflationary pressures and economic uncertainty. The latest official data on economic data and market expectations showed that the average weekly salary excluding bonuses increased by 5% in the three months to June, with inflation rate of 3.8% in July. Reuters predicts that inflation will average 3.8% this quarter and 3.6% in the next quarter, and will remain at a high of 3.4% for the whole year, falling to 2.5% in 2026. Labor and inflation data for August will be released on September 16 and 17, respectively, which are crucial to the tone of the November meeting. James, Head of Global Macro Strategy, TD Securities"Next week's inflation data will determine whether to cut interest rates in November and whether the Bank of England will adjust its wording to suggest a slowdown in rate cuts." Although the UK performed well in the G7 this year with an annual growth rate of 1.3%, this is mainly due to government spending and private demand remains sluggish. In 2026, the economy is expected to achieve quarterly growth of 0.2-0.4%, with the annual growth rate dropping to 1.2%, lower than 1.4% in 2024. High inflation squeezes real household income and restricted interest rates continue to curb private sector demand. The Bank of England expanded its balance sheet to 875 billion pounds (about $1.2 trillion) by purchasing government bonds during the global financial crisis and the pandemic. Since 2022, the central bank has reduced its bond holdings to £558 billion. A Reuters survey shows that 12 economists expect the Bank of England to further reduce its bonds between October 2025 and September 2026, with a median forecast of £67.5 billion, ranging from £50 billion to £100 billion. Analysts' view: Controversy over the path of interest rate cuts intensifies, Victoria Clark, chief economist at Santander CIB, said: "Inflation rate reaches twice the central bank's target, which is far from enough to support interest rate cuts, and inflation expectations are upside risks." The bank has adjusted its forecasts, believing that the Bank of England may have www.vifu.netpleted the current interest rate cut cycle. Clark warned that continued high inflation could force the central bank to maintain restrictive policies for longer. The Bank of England faces the dual challenges of inflation and economic growth. Market expectations for the interest rate decision on September 18 remain unchanged, but the possibility of a rate cut in November has declined due to the latest data. Jens Eisenschmidt, chief European economist at Morgan Stanley, said that if inflation data unexpectedly rises in September or the labor market improves significantly, the Bank of England may delay rate cuts until early 2026. He pointed out: "The stickiness of UK inflation is far beyond expectations, and the service industry is particularly stubborn, which may force the central bank to adopt a more cautious attitude." The Bank of England is in a dilemma: high inflation limits room for interest rate cuts, but economic slowdowns and weak labor markets provide reasons for loose policies. "The central bank may cut interest rates by 25 basis points in November, but only if inflation data no longer deteriorates." He added that the Bank of England's balance sheet shrinkage may further tighten financial conditions, indirectly affecting the pace of interest rate cuts. The Bank of England's September 18 meeting statement and economic forecast update will be the market focus. Lucy Baldwin, global macro strategist at UBS, predicted: "Even if interest rates remain unchanged in September, the central bank may use wording to suggest the possibility of a rate cut in November, but only if inflation and wage growth data support easing." She pointed out that geopolitical risks and global economic uncertainty may further push up demand for safe-haven assets, indirectly supporting pound and UK Treasury bonds. Barclays economist Fabrice Montagne believes the Bank of England may suspend interest rate cuts before the first quarter of 2025 to evaluateEstimate inflation trends and fiscal policy impacts. He said: "The sustainability of government spending is questionable, weak private sector demand may drag down growth in 2026, and the central bank needs more data to confirm the trend of inflation decline." www.vifu.netprehensive analysis and outlook for the Bank of England to keep interest rates unchanged on September 18 almost certain, but the prospect of a fourth-quarter rate cut has been intensified by high inflation and uncertainty in economic data. The market will closely monitor labor and inflation data from September 16-17, as well as wording and economic forecasts from the central bank meeting. In the long run, inflation is not expected to return to its 2% target by 2027, and restricted interest rates and balance sheet shrinkage may continue to curb private demand. 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