Goldman Sachs Projects Hawkish Turn for Bank of England: Rate Hike Forecast

Goldman Sachs alters its forecast for the Bank of England, anticipating a 25-basis-point hike in November 2026 amid enduring inflation and stable growth. This shift comes as energy prices surge, driving inflation higher than expected. The forecast concurs with maintaining rates at upcoming meetings before potential cuts in 2027.

Goldman Sachs has adjusted its stance on the Bank of England, now predicting a 25-basis-point interest rate hike this coming November. Persistent inflation and robust economic growth underpin this more hawkish forecast, contrasting with earlier expectations of unchanged rates throughout 2026.

The change in projection aligns with recent increases in wholesale energy prices, contributing to a spike in headline inflation surpassing initial calculations. Britain's economy exhibited resilience, expanding at its fastest annual pace in 18 months by July, bolstered by advances in artificial intelligence and a solid first half of the year.

Despite the expected November rate adjustment, Goldman Sachs envisions the Bank of England will pause further rate increases as energy prices diminish, eventually leading to rate cuts by late 2027. This view is bolstered by trader expectations and contextualized by recent European Central Bank actions and upcoming decisions from the Federal Reserve and Bank of Japan.