Four Bank of England scenarios, with a rate cut widely expected

Expect an 8-1 vote in favour of another rate cut next Thursday, though we doubt the Bank will drop too many hints on what comes next. We're looking for three further cuts later this year, but a shaky jobs market and the prospect of lower services inflation risks pushing the BoE into more aggressive moves

• The BoE is expected to vote 8-1 in favor of a 25 basis point rate cut on February 6, with further cuts likely throughout the year.

• Financial markets are anticipating four rate cuts in 2025, with a total of 78 basis points of easing by year-end.

• Growth and inflation forecasts are expected to be revised down, with growth potentially lowered to around 1% for 2025.

• Headline inflation may rise to 3% later this year, mainly due to energy prices, but is expected to be at or below 2% in two years.

• The jobs market is shaky, with private-sector employment falling and wage growth expected to slow.

• Gilt yields have eased, and the pound has recovered slightly, but potential downside risks remain for sterling.

The overall theme is dovish, with the BoE likely to continue gradual easing without committing to specific timing. The risk of more aggressive easing later in the year is also highlighted.
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