(Reuters) -Morgan Stanley, Citigroup and UBS Global Research forecast that the Bank of England (BoE) would deliver an interest rate cut in December, they said separately on Friday, a day after the central bank kept rates unchanged at its policy meeting.
They joined Goldman Sachs, which was the first to revise its forecast for a cut next month after the policy announcement on Thursday. All four had previously forecast no rate cut in December.
Britain’s 3.8% inflation rate is above the central bank’s 2% target, but surprisingly held steady in September. The recent labour report has also indicated some signs of cooling.
The BoE’s nine-member Monetary Policy Committee voted 5-4 to hold rates at 4% on Thursday. A shift in remarks on the rate cut outlook followed – to “if progress on disinflation continues, Bank Rate is likely to continue on a gradual downward path” from “gradual and careful approach”.
“What is clearer, we think, is that upcoming decisions are now the Governor’s to make. For the time being, we think he might support a December cut,” said Citigroup analysts.
Governor Andrew Bailey hinted on Thursday that upcoming economic data and the Autumn Budget could pave the way for a cut.
Following the December cut, Citi and Japanese brokerage Nomura forecast the next cut to be in April, while Morgan Stanley expects it in February.
UBS expects the central bank to cut rates in both February and April meetings, while Barclays has put its forecast for future meetings under review.
Traders are betting on a roughly 60% probability for the central bank to cut rates by 25 basis points at its December meeting, as per data compiled by LSEG.
(Reporting by Akriti Shah and Siddarth S in Bengaluru; Editing by Harikrishnan Nair)
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