The Bank of England’s Monetary Policy Committee has shifted toward a more dovish stance following its hawkish positioning in March, according to ABN AMRO analysts. The Dutch bank now anticipates one additional insurance rate hike during the summer months, though with diminished conviction compared to previous assessments. Following this expected increase, the MPC is projected to adopt a wait-and-see approach as energy supply conditions normalize through the third quarter.
ABN AMRO’s revised forecast suggests rate cuts won’t materialize until late 2026, indicating an extended period of elevated borrowing costs for UK businesses and consumers. This timeline reflects concerns about persistent inflation despite improving energy market dynamics. Sterling positioning and UK gilt yields could face volatility as markets digest the prolonged high-rate environment, while mortgage-dependent sectors may continue experiencing headwinds through 2025.
FXnCO Insight
Traders should monitor summer MPC meetings closely for signals confirming the final hike, as any deviation from this baseline could trigger significant repricing in sterling and UK fixed income markets.
Source: FXStreet