BOE Rate Cuts on Horizon as Inflation Remains Tame

The Bank of England is expected to diverge from its US counterpart in monetary policy decisions. Inflation remains relatively cool, which could lead to rate cuts next year. This contradicts market pricing that currently expects three hikes from the Bank of England over the next 12 months.

US Fed Chair Kevin Warsh's hawkish stance at Jackson Hole and rising energy prices have influenced this expectation. However, the UK economy has distinct characteristics compared to the US, with rates still being restrictive.

GDP growth in the UK follows a familiar pattern of stronger first-half performance followed by slower second-half growth, dating back to 2022. This trend is also seen in the current year's GDP trajectory.