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BofA: Bank of England to Hold Key Rate in June Meeting; Two Hikes Expected in July, September

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BofA Global Research forecasts the Bank of England will retain its key rate at 3.75% at its June 18 monetary policy meeting, with a 7-2 vote in favor of a hold and risks of a 6-3 vote.

"Dovish inflation/labour market data, lack of explicit guidance on June and MPC's patient approach is likely to mean a hold. The dovish data should reduce the urgency for the BoE to act, especially with swing voters not showing a rush to hike," analysts said Thursday in a preview note.

Looking forward, the research firm anticipates the UK central bank to raise its benchmark rate in July and September amid expectations of continued high energy prices through 2026 and increased risks of second-round effects.

"Moreover, the BoE is currently taking some comfort from the tightening in financial conditions weighing on inflation, but the BoE actually needs to credibly deliver on the hikes priced in to maintain those tight financial conditions," BofA added.

Three quarterly rate cuts to 3.5% are then projected to follow, beginning from the second quarter of 2027, with risks of 3.25% and earlier reductions.

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