HSBC Says Bank of England Unlikely to Cut Rates Before April 2026 as Inflation Persists

HSBC said on Monday that it does not expect the Bank of England to begin cutting interest rates until April 2026, citing persistent and comparatively strong inflationary pressure in the United Kingdom.

Analysts at the bank said price rises in the UK were proving “more acute than in other Western economies” and that members of the BoE’s Monetary Policy Committee were showing signs of a “hawkish” shift that would delay policy easing. The firm said it now expects the BoE to pause planned rate cuts until next April after having earlier modelled a more gradual reduction in borrowing costs.

The warning from HSBC comes as official data show inflation running at 3.8 percent, an 18-month high and, the bank noted, the highest rate among the G7 advanced economies. HSBC referenced a recent increase in National Insurance as one factor that has contributed to upward pressure on prices and said inflation is expected to rise toward 4.0 percent later this year.

Bank of England Governor Andrew Bailey said last week there was "considerably more doubt" about the timing of future rate cuts, comments that echoed HSBC’s reassessment. The central bank has signalled a cautious approach to easing after a prolonged period of rate rises aimed at bringing inflation back to target.

A further delay in the path to lower rates would have direct consequences for millions of households and businesses. Higher-for-longer borrowing costs tend to translate into larger mortgage payments for variable-rate borrowers and can constrain consumer spending and corporate investment.

HSBC described the bank’s likely stance as a move away from an earlier expectation of imminent easing toward what it called a "careful and gradual" approach. The forecast marks a shift from some market expectations that had priced in interest-rate reductions earlier than next spring.

Financial markets have been sensitive to signals from both the BoE and economic data, and economists say the interplay between wage growth, fiscal measures and energy prices will be central to the policy outlook. If inflation remains elevated, the BoE will face pressure to retain restrictive policy settings to meet its mandate of price stability.

The central bank’s decision timetable will be watched closely by mortgage lenders, savers and investors. Any delay to cuts will affect decisions across the financial sector, including pricing for loans and the attractiveness of fixed-income investments.

HSBC’s revised projection was published on Sept. 8, 2025. The bank reiterated that its view depended on the persistence of inflationary pressures and the BoE’s reaction to incoming economic data. Governor Bailey and other policymakers are scheduled to comment further following upcoming data releases and monetary policy meetings, which market participants will scrutinise for guidance on the timing of any future easing.