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One financial expert predicts that interest rates could be slashed to 2.75% by late summer due to rising unemployment.
four cuts interest rate brought last year bank of englandof (BoE) base Interest rate dropped to 3.75%but Bill Papadakis of Swiss bank Lombard Odier thinks monetary policy committee (MPC) will go further this year.
He expects GDP growth to fall sharply to 2.75% by the end of summer, effectively compressing last year’s full emissions reductions into just over seven months.
Mr Papadakis said unemployment was rising and unemployment was falling inflation Policies in key areas will result in the Monetary Policy Committee cutting interest rates at a faster pace, and the Bank of England will be under pressure to “support the economy during difficult times.”
“Strong wage growth Economic growth has slowed significantly as the employment situation has worsened. “Combined with lower services sector inflation, this should translate into lower price pressures, allowing the Bank of England to cut interest rates to 2.75%, a level close to neutral, by the end of the third quarter,” he said. “
The neutral interest rate refers to the level that supports the economy without affecting price increases. Most experts believe the Bank of England will not return interest rates to the near-zero levels they lasted a decade or so after the global financial crisis.
Business leaders, including the British Chamber of Commerce (BCC), have continued to call for further interest rate cuts to ease the pressure on businesses from rising employment costs, business rates and other expenses.
For much of 2025, the Bank of England Governor Andrew Bailey Preaching the need for careful, gradual spending cuts to avoid another surge in inflation after price surges in 2022 and 2023.
Inflation remains at 3.2%, well above the government’s 2% target but down sharply from July’s high of 3.8%.
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However, Papadakis’ view on the pace of rate cuts – four by the end of the third quarter of this year – currently looks a bit out of the ordinary.
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MPC votes are scheduled for February, March, April, June, July and September.
Barclays analysts pointed out that with only one round of economic data released before the February meeting, it is unlikely that there will be enough data to call for consecutive rate cuts around the new year, so four rate cuts in five meetings will be needed to meet Papadakis’ forecast, or at least a vote calling for a double 50 basis point rate cut (one cut of 0.5 percentage points instead of 0.25 percentage points each).
The last time a rate cut was voted for by more than a quarter of a percentage point was in early 2020, at the onset of the coronavirus pandemic.
Sanjay Raja, chief UK economist at Deutsche Bank, said after the December rate cut that he would maintain his “long-term call for two further cuts in the first half of 2026”, adding that forward-looking price data and further deterioration in the labor market could further influence future rate cuts. Deutsche Bank expects interest rate cuts to be held at the March and June Monetary Policy Committee (MPC) meetings, with interest rates remaining at 3.25%.
Oxford Economics said the Monetary Policy Committee will cut interest rates twice throughout 2026, in April and November. “We expect [interest rates] Growth will reach 3.25% by the end of 2026,” said their chief UK economist Andrew Goodwin.
Money markets are also now pricing in two rate cuts throughout the year.