The Bank of England is widely expected to cut interest rates by 25 basis points on Thursday and could signal further policy easing. Any indication that rates could be cut by more than markets currently expect would potentially weigh on sterling but boost U.K. equities. The following is a selection of analysts' comments:

BOE Expected to Cut Rates This Week, Keep Guidance Unchanged

1320 GMT - The Bank of England is expected to cut interest rates by 25 basis points to 4.50% on Thursday, TD Securities analysts say in a note. The BOE is likely to keep policy guidance unchanged, the analysts say. However, the likelihood of interest rate cuts at subsequent meetings is rising, TD Securities says. Markets place a 97% probability of a BOE rate cut this week, LSEG Refinitiv data shows. (miriam.mukuru@wsj.com.

BOE Could Signal Another Rate Cut in March

1243 GMT - The Bank of England is expected to cut interest rates on Thursday and it could signal another rate cut in March, Peel Hunt's Kallum Pickering says in a note. The BOE is likely to keep monetary policy guidance unchanged with one-per-quarter interest rate cut, Pickering says. "However, risks are skewed towards policymakers signaling a willingness to react more forcefully to economic weakness," he says. Markets expect a total of 84 basis points of BOE interest rate cuts in 2025, LSEG Refinitiv data show. (miriam.mukuru@wsj.com)

Sterling Could Fall if BOE Signals More Rate Cuts Than Market Expects

1224 GMT - Sterling could fall if the Bank of England cuts interest rates as anticipated Thursday and indicates it could ease monetary policy by more than markets expects, Ebury strategist Matthew Ryan says in a note. The risks to sterling are "tilted marginally to the downside" as it is possible the BOE sounds increasingly pessimistic on the economic growth outlook, he says. The BOE might warn that this could lead to a more aggressive pace of rate cuts this year than the three currently priced in by swap markets. Ebury expects the BOE to cut rates by 25 basis points on Thursday with either a 7-2 or 8-1 vote. (renae.dyer@wsj.com)

FTSE 100 Could Rally to New All-Time High if BOE Signals More Rate Cuts

0912 GMT - The U.K. FTSE 100 index could rise to a new all-time high if the Bank of England signals additional future interest-rate cuts during Thursday's rate decision, Capital.com's Daniela Sabin Hathorn says in a note. "A BOE rate cut could renew investor interest in U.K. stocks," she says. The FTSE 100 reached a new high of 8692.84 on Jan. 31. Any hints of more interest-rate cuts could reignite a U.K. equities rally, Hathorn says. (miriam.mukuru@wsj.com)

Gilt Yields Fall Ahead of BOE Rate Decision on Thursday

0830 GMT - Yields on U.K. government bonds, or gilts, fall ahead of an anticipated interest-rate cut by the Bank of England this week. Markets price in a 98% probability of a 25 basis-point cut to 4.5% on Thursday, LSEG Refinitiv data show. "I suspect this Thursday's BOE will be sufficiently dovish to strongly raise odds of another cut already at the March meeting," Saxo's John Hardy says in a note. The 10-year gilt yield falls 3 basis points to 4.488%, Tradeweb data show. (miriam.mukuru@wsj.com)

BOE Could Cut Rates Only Twice More, Pausing in Second Half of 2025

1114 GMT - The Bank of England could cut interest rates only twice more, including once at this week's meeting, pausing rate reductions by the second half of the year, Berenberg's Andrew Wishart says in a note. Concerns about weak growth and rising unemployment rate are likely to result in faster initial rate reductions, but fears about a rebound in U.K. inflation could then cause the BOE to pause, he says. "Rising government spending and rate cuts will encourage demand and allow firms to cover higher costs by raising prices." Berenberg expects U.K. inflation could reaccelerate to 3.0% in 2025. U.K. money markets price in three rate cuts this year, though a second reduction isn't fully priced in until June. (miriam.mukuru@wsj.com)

BOE Could Signal A Rate Cut in March at Thursday's Decision

1029 GMT - The Bank of England is widely expected to cut interest rates when it announces a decision Thursday, and it could hint at another interest-rate cut in March, Berenberg's senior economist Andrew Wishart says in a note. "Until now, the BOE has cut at alternate meetings, but a stagnating economy and declining employment argue for more urgent action," he says. Markets price in a total of 30 basis points of interest-rate cuts in February and March, LSEG Refinitiv data show. "It is sensible for the BOE to lower interest rates to prevent a larger drop in [U.K.] employment," Wishart says. (miriam.mukuru@wsj.com)

Markets Could Price in More BOE Rate Cuts After Thursday's Decision

1536 GMT - The Bank of England's guidance on the possible path of future interest-rate cuts when it announces a decision on Thursday is likely to influence U.K. market movements much more than the expected interest-rate cut itself, Morgan Stanley analysts say in a note. The risks are skewed towards pricing more BOE rate cuts in 2025, although "the scope for a significant move appears limited," Morgan Stanley says. Markets price in a 94% probability of the BOE cutting interest rates by 25 basis points on Thursday, LSEG Refinitiv data show. Markets price in a total of 81 basis points of BOE interest-rate cuts in 2025. (miriam.mukuru@wsj.com)

Sterling Could Fall if BOE Signals Further Rate Cuts

1459 GMT - Sterling could fall if the Bank of England cuts interest rates on Thursday and signals further cuts to support economic growth, XTB's Kathleen Brooks says in a note. Inflation remains above the BOE's target but the central bank is likely to cut rates, citing a sluggish economy and a softening in labor market, she says. The BOE is likely to reiterate that further rate cuts will be gradual. However, if the BOE emphasizes that the economy is weakening and at risk of stagnation, this could prompt the market to price in further rate cuts and weigh on sterling. (renae.dyer@wsj.com)

(END) Dow Jones Newswires

February 05, 2025 08:47 ET (13:47 GMT)

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