The Zhitong Finance App learned that the survey shows that most economists expect the Bank of England to cut interest rates by 25 basis points to 5% next week. Since inflation expectations hover near target, the Bank of England will embark on a slow and steady path of interest rate cuts, and will cut interest rates again this year.

The UK's benchmark interest rate has been at a 16-year high of 5.25% since August last year. The Bank of England was one of the first central banks to start raising interest rates after the pandemic. Like other central banks, the Bank of England is currently considering easing policies.

In the July 18-24 survey, 49 out of 60 economists believed that the Bank of England would cut interest rates to 5% on August 1. However, in a similar survey in June, 97% of respondents believed that interest rates would be cut in August.

Allan Monks of J.P. Morgan Chase said: “We expect the Bank of England to cut interest rates by 25 basis points next week, although the reasons for lowering interest rates are far from clear.” “If interest rates are lowered in August, then it is likely to pass by a narrow margin of 5 to 4.”

In June of this year, the Bank of England's monetary policy committee voted 7-2 to keep interest rates unchanged, but some members said their ideas are now “very balanced.”

Interest rate cuts in August will put the Bank of England ahead of the Federal Reserve in terms of policy relaxation, but behind the ECB. The ECB cut interest rates for the first time in June. Although interest rate cuts were suspended this month, it said there was “plenty of room” to cut interest rates in September. The Federal Reserve is expected to wait until September to cut interest rates.

The UK's inflation rate remained at the target level of 2% in June. At the same time, despite a slight slowdown in wage growth, it was still too strong for the Bank of England, and the market reduced its bets on cutting interest rates in August.

The median forecast shows that after cutting interest rates in August, the Bank of England will suspend interest rate cuts in September and then cut interest rates by 25 basis points in November, reducing interest rates to 4.75%. The Bank of England will once again suspend interest rate cuts in December.

The market expects the Bank of England to take a similar slow and steady pace next year, cutting interest rates by 25 basis points each in the first and second quarters, 50 basis points in the third quarter, 25 basis points in the fourth quarter, and reducing interest rates to 3.50% by the end of 2025.

Sanjay Raja of Deutsche Bank said, “Basically, interest rates are cut by 25 basis points every quarter. We think this is a very gradual path of interest rate cuts. The ultimate goal is a neutral interest rate, that is, around 3%.”

“We will reach this target in the summer of 2026, so this will be a very long cycle of interest rate cuts towards a neutral policy.”

The growth path will also remain stable. The market expects the UK economy to grow 0.3% quarterly by the end of 2025.

The GDP growth rate for the whole of this year will be 0.8%, and will accelerate to 1.3% next year, slightly higher than the June forecast.