BoE Rate Hikes Loom as Citi, Goldman Sachs Forecast Strong Inflation

Citi and Goldman Sachs are now forecasting interest rate hikes from the Bank of England (BoE) by the end of next year. This shift in their forecasts comes as UK inflationary pressures remain strong, driven by rising energy prices and higher-than-expected inflation.

Rising oil prices have added to pressure on energy costs, which could slow the disinflation process and make the BoE more cautious about easing policy. Goldman Sachs considers higher energy prices one of the main risks to the UK's inflation outlook.

Despite this, both banks still see room for the BoE to re-enter an easing cycle by the end of 2027 at the latest. Market expectations have started to shift, with investors now pricing in around 47 basis points of BoE rate increases by the end of the year.