Goldman Sachs Revises Its Monetary Policy Outlook

Goldman Sachs has shifted its expectations for the Bank of England’s policy trajectory, forecasting a 0.25% rate cut in November 2025. The revision reflects the bank’s assessment that inflationary pressures are easing gradually and that economic activity across the United Kingdom is slowing more sharply than anticipated.

The change marks a notable adjustment from Goldman’s prior forecast, which suggested no rate cuts until 2026. Analysts at the firm now anticipate that the BoE will begin a gradual easing cycle, reducing borrowing costs to 3.0% by mid-2026. This move would place the BoE slightly ahead of the European Central Bank and closer in timing to the expected policy pivot from the U.S. Federal Reserve.

According to recent official data, consumer inflation in the UK slowed to 3.8% in September, still above target but significantly below the 11.1% peak recorded in late 2022. Combined with moderating wage growth and rising unemployment claims, these figures have strengthened the case for a modest rate reduction later this year.

Economic Context and Market Implications

A rate cut in November would signal that the BoE believes inflation is on a sustainable downward path and that policy tightening has largely run its course. The central bank’s benchmark rate currently stands at 5.0%, its highest level since 2008, following a series of aggressive hikes aimed at curbing post-pandemic inflation.

Market participants view Goldman Sachs’ revised call as a sign that the BoE is edging closer to a policy pivot. If realised, a November cut could support consumer spending and business investment, both of which have weakened under high borrowing costs.

However, financial markets remain cautious. Sterling could face downward pressure if investors anticipate a faster-than-expected easing cycle, while long-term gilt yields may decline further as traders price in additional cuts through 2026.

Risks to the Forecast

Despite the growing case for easing, several uncertainties remain. Inflation has proven volatile, particularly in the services sector, where price growth remains strong. Any rebound in energy costs or a slowdown in disinflation could delay policy action.

Moreover, the BoE has repeatedly emphasised its data-dependent approach. Officials have warned that cutting rates too soon could risk reigniting price pressures, undermining public confidence in the bank’s inflation-targeting credibility.

Goldman Sachs acknowledged these risks but noted that recent macroeconomic data justify a more flexible stance. The investment bank expects the BoE to frame its November decision as the beginning of a measured and conditional easing phase rather than a full policy reversal.

What Comes Next

Investors and policymakers alike will monitor upcoming inflation and labour-market releases closely. Any further decline in wage growth or consumer prices could reinforce expectations for a November rate cut.

For international markets — including Israel and the United States — the BoE’s policy path may have secondary effects on exchange rates, capital flows, and investor sentiment. A weaker pound could influence trade dynamics and asset allocation decisions in both regions.

While Goldman Sachs’ forecast has sparked renewed discussion over the timing of rate cuts, the ultimate decision rests with the BoE’s Monetary Policy Committee. As of now, November stands as a pivotal month that may mark the beginning of the UK’s long-awaited monetary easing cycle.