Goldman Sachs Sees UK Interest Rate Hike as Energy Costs Rise

Goldman Sachs has revised its forecast for UK interest rates, predicting that the Bank of England will raise the bank rate by 25 basis points in November 2026. This change comes as a result of persistent inflation risks and rising wholesale energy prices. The recent surge in oil prices above $100 a barrel is a key factor behind this revised view.

The brokerage notes that recent economic data has also supported the case for tighter policy, with Britain's economy expanding at its fastest annual pace in 18 months in July. This growth was driven by artificial intelligence and continued momentum from a strong first half.

Goldman Sachs analysts expect the Bank of England to hold rates after a November hike as easing energy prices reduce the need for further tightening, before beginning rate cuts in late 2027. Market traders are pricing in 47 basis points of rate hikes by year-end, with rate cuts anticipated to start in late 2027.

The shift in Goldman Sachs' forecast highlights ongoing concerns over inflation and monetary policy in the UK. The Bank of England's decision will have significant implications for investors and the broader economy.