The Bank of England is about to begin a series of rate cuts that will lead the base rate to hit 2.75% next November, according to Goldman Sachs.

The forecast is an upgrade by the US investment bank, which last month said the UK central bank would settle at a 3% interest rate by September 2025.

It says that “rapidly falling inflation and dovish Monetary Policy Committee commentary—reinforces our view that the BoE will ultimately lower rates more than priced,” in a note to clients.

UK inflation last week fell unexpectedly to 1.7% in the year to September, the lowest rate in three-and-a-half years, taking it comfortably below the Bank’s 2% target.

Also, Bank of England governor Andrew Bailey said that its rate-setting committee should consider a “more aggressive” position on base rate cuts earlier this month.

However, a day later the Bank’s chief economist Huw Pill seemed to contradict this, saying that rates should not be cut “too far or too fast.”

Today money markets indicate a 98% chance that the Bank will cut rates at its next meeting on 7 November, from 5% to 4.75%.

By next November, markets suggest rates could be 3.75% or lower – ahead of Goldman’s new forecast.

But Goldman analysts, led by chief European economist Sven Jari Stehn, say that while interest rates rose during the pandemic, UK conditions are right to continue a longer-term downward trend, should inflation remain at target.

Stehn says: “We remain comfortable with our forecast for consecutive 25bp cuts and lower our terminal Bank rate forecast to 2.75% in November 2025 — from 3% in September 2025 — notably below current market pricing.”