Goldman Sachs updated its view of Bank of England policy on Monday, shifting from a scenario in which rates would remain unchanged through 2026 to one that anticipates a 25-basis-point increase in November 2026. The brokerage’s revision reflects recent developments in energy markets, headline inflation and growth statistics.
Analysts at Goldman Sachs said that in recent weeks wholesale energy prices have climbed sharply, contributing to a larger rise in headline inflation than the Bank of England had expected. The note ties part of the energy price increase to renewed hostilities in the Middle East, a dynamic that has pushed oil prices above $100 a barrel.
At the same time, growth indicators have been stronger than anticipated. Data released earlier in the month showed Britain’s economy expanded at its fastest annual pace in 18 months in July. Goldman Sachs highlighted that this performance was supported by advances related to artificial intelligence and by momentum carried over from a strong first half of the year.
Despite the change to its long-run outlook, Goldman Sachs expects the BoE to leave the bank rate at 3.75% at the upcoming September 17 meeting, a call that aligns with consensus expectations. The firm’s scenario envisions a one-time hike in November, followed by a period in which the BoE holds rates steady as easing energy prices reduce the imperative for further tightening.
Looking beyond that pause, Goldman Sachs projects the central bank will begin cutting rates in late 2027. The note implies that the trajectory of energy prices and the evolution of headline inflation will be important variables shaping the BoE’s policy path between now and when cuts might commence.
This change in forecast reverses Goldman Sachs’s prior expectation of no rate moves through 2026, and it reflects the interaction of supply-driven energy shocks, inflation readings outpacing central bank projections and a resilient growth pulse in recent economic data.
What this means
The firm’s revised outlook signals a modest tightening relative to its earlier stance, driven by recent commodity and inflation developments along with stronger-than-expected GDP readings. The expectation of a pause after a November hike and eventual cuts in late 2027 frames the BoE’s likely near-term policy rhythm under Goldman Sachs’s scenario.