Nomura Securities has updated its outlook for UK monetary policy, forecasting two 25-basis-point rate cuts by the Bank of England—in April and July. This marks a shift from its earlier projection of reductions in March and June, signaling growing caution amid persistent inflationary pressures and evolving economic dynamics.
What’s Behind the Delay?
While early 2024 saw hopes for a spring pivot toward easing, recent data has tempered those expectations. Inflation has proven stickier than anticipated, particularly in the services sector. Wage growth remains elevated, and the labor market continues to show resilience—factors that reduce the urgency for rate cuts.
- Core inflation has exceeded forecasts for three consecutive months
- The job market remains tight with low unemployment
- Wage pressures show limited signs of cooling
Given this environment, Nomura now believes the BoE will wait until April to begin loosening policy, with a second cut more likely in mid-summer rather than early summer.
Market Implications
The revised forecast could influence investor positioning in UK assets. Gilt yields have adjusted to reflect delayed easing, and the pound may hold its ground in the near term. Meanwhile, sectors like housing and consumer credit may face extended pressure from higher-for-longer borrowing costs.