Citi Research has shifted its stance on Bank of England monetary policy, calling for two 25-basis-point interest rate hikes in November 2026 and February 2027 — the symmetrical opposite of its previous forecast, according to a note published Wednesday by Reuters-sourced analyst Navamya Acharya.
Citi expects the BoE to hold rates steady at 3.75% in September, while projecting that the same three Monetary Policy Committee members who dissented for a hike in July — Sarah Breeden (replacing Pill), Ben Broadbent (replacing Greene), and Catherine Mann — will again push for a 25-basis-point increase, replicating the committee’s 6-3 split from that month.
Despite the near-term hike call, Citi maintains its longer-run forecast for two additional 25-basis-point cuts late next year, leaving its terminal rate estimate around 3.75%. That contrasts with current market pricing, which anticipates roughly four BoE hikes by mid-2027.
The revised outlook rests on a higher inflation trajectory. Citi now projects headline inflation will average 3.5% in the fourth quarter of 2026 and 3.6% in the first quarter of 2027, above the BoE’s own summer projection of a 3.2% peak later this year. The bank cited the conflict in the Middle East and disruption through the Strait of Hormuz as key drivers, pushing up oil and gas prices and stoking inflationary pressures. Citi acknowledged downside risk that the committee would continue holding rates if hostilities pause.
BoE Governor Andrew Bailey pushed back against hawkish speculation at his most recent press conference, telling a journalist not to leave “thinking that the Bank of England is edging towards a hike.”
On quantitative tightening, Citi expects the central bank to slow its pace to £50 billion, in line with market median expectations, while maintaining sales of long-dated gilts.
