UBS Sees Bank of England Pausing Next Week, With Next Rate Cut in November

10:16 AM EDT, 09/10/2025 (MT Newswires) -- Following a 25bps rate cut on Aug. 7, UBS said it expects the Bank of England to keep the policy rate unchanged at 4.0% on Sept. 18.

Despite a widely expected rate cut, the outcome of the BoE's August meeting was more hawkish than weUBS had anticipated, with the vote to reduce turning out rather close and the Monetary Policy Committee (MPC) judging that "the upside risks around medium-term inflationary pressures have moved slightly higher since May."

The available data since the last meeting -- strong Q2 gross domestic product, the August labor market report, which showed a smaller-than-expected drop in the number of payrolled employees. and disappointing July inflation -- reinforce the bank's expectation of a pause next week.

While the MPC will get another labor market report, August inflation and July GDP ahead of next week's meeting, UBS "firmly" doubts that even large surprises in the data would shift the balance in the MPC. As regards the vote split, the bank sees a strong majority (7-2) in favor of keeping rates on hold, with only Swati Dhingra and Alan Taylor voting for a 25bps rate cut.

The bank also predicts no change in the forward guidance with the MPC sticking to its previous message of a "gradual and careful" approach to easing.

UBS call remains that the likely pause on Sept. 18 will be followed by a 25bps rate cut to 3.75% on Nov. 6. However, the bank acknowledges the risk around the timing of the next rate cut. While UBS thinks that improving underlying services inflation should allow the BoE to continue with its gradual approach to easing, cuts might be delayed in the event of further upside surprises in inflation ahead of the November meeting.

In addition, the fact that by the time of the November meeting the MPC will only have September CPI and the Fall Budget will be delivered only on Nov. 26 might be factors in favor of delaying the next cut until there is more evidence of inflation easing and clarity on the fiscal impact on inflation, according to UBS.

For 2026, the bank continues to expect three 25bps rate cuts (February, April and July) to 3% by July 2026.

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