Bank of England's Rate Cut Prospects Dwindle Amidst Inflation Concerns

Major Wall Street brokerages have retreated from earlier predictions of a September interest rate cut by the Bank of England as inflation figures defy expectations. Britain's inflation rate climbed to a surprising 3.6% in June, surpassing economists' forecasts of a steady 3.4%.

The labor market continues to exhibit resilience despite slowed pay growth and declining employee numbers in May. This shift has prompted institutions like BofA Global Research, Citigroup, Morgan Stanley, and Goldman Sachs to reconsider their rate cut projections, moderating expectations to a more cautious and data-driven approach.

BofA and Morgan Stanley still foresee rate cuts in August and November, while Goldman Sachs predicts a phased reduction from November to March 2026. Citigroup anticipates three rate cuts this year. Markets currently factor in a 77.3% chance of a rate cut in August, with the BoE's next policy meeting scheduled for August 7.

(With inputs from agencies.)