BofA now expects Bank of England to hike in November and February, reversing call for a cut
The shift follows the BoE's decision last week to hold its rate at 3.75% despite three policymakers pushing for an immediate increase.
Published
Bank of America Global Research now expects the Bank of England to raise interest rates by 25 basis points in November 2026 and again in February 2027. The bank had previously forecast the BoE would hold rates through the rest of this year before cutting to 3.5% in November 2027.
The reversal comes after the Bank of England held its key rate at 3.75% on September 17 in a 6-3 vote, with Catherine Mann, Megan Greene and Huw Pill voting for an immediate hike to 4%, according to the Bank of England and CNBC. UK inflation rose to 3.1% in August, its first reading above 3% since March, which the Bank of England has linked to energy prices tied to the Iran war, according to commentary cited by Orbit Remit. The Bank of England's own projections, published alongside the September decision, show inflation peaking above 4% in early 2027.
BofA's earlier call for a hold, then a cut, had rested on expectations of limited second-round inflation effects and a soft labour market, according to FINWIRES, though the bank had already flagged its conviction in that view was fading as hike risk rose. Barclays, UBS and J.P. Morgan have each moved to a similar call for hikes in November 2026 and February 2027, according to IndexBox. UBS expects the Bank of England to start cutting again in the fourth quarter of 2027, taking the rate down to 3.25% by the third quarter of 2028.
BofA's new timeline lines up with market pricing of four to five quarter-point moves through the end of 2027, pointing to a broader shift toward expectations of tighter policy for longer. That marks a turn from the Bank of England's earlier guidance toward cuts, and the shift has already weighed on sterling and long-dated gilts, suggesting the change in direction is already reflected in prices.