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City economists say Bank of England path is below market bets of 4.75%
The Guardian reported Sunday that several City economists see Bank Rate peaking well below the 4.75% to 5% path implied by markets through next summer.
- New headline Was: “Interest rates unlikely to reach 4.75% by next summer, say City economists”
- Our desk filed its story
Based on reporting by The Guardian
The Guardian reported Sunday that several City economists expect the Bank of England to raise Bank Rate by less than the full percentage point, or more, that market-implied pricing suggests by next summer1.
According to that account, market-implied rates point to at least four increases over the next year, taking Bank Rate from 3.75% now toward 4.75% by the end of July 2027, and possibly 5% by December 20271. The newspaper said those economists see little evidence that higher energy costs are lifting other prices sharply enough to justify that path1.
ING's James Smith told a City briefing last week, in the Guardian's reporting, that swaps pricing of four hikes and no subsequent cuts does not match what most economists expect, and that the Bank could be cutting again by the end of 20271. Deutsche Bank's Sanjay Raja was reported as saying mainstream forecasts do not show a rise to 5% by the end of next year on today's information, and that much of the priced path is risk premia; stripping that, he estimated about 50 basis points of hikes1. Deutsche Bank's base case, as reported, is 4.25% by February 2027 and a hold through the end of 20271.
The Guardian said the Bank is widely expected to raise rates to 4% on Nov. 5 after September inflation at 3.5%1. It cited Goldman Sachs as seeing a path still below market pricing while expecting a November rise to 4%, Morgan Stanley as expecting November and February increases then a hold, Oxford Economics as forecasting two 25-basis-point moves to 4.25%, and Bank chief economist Huw Pill as having told an IMF event in Bangkok he was sceptical of four hikes over the next year1.
