Goldman Sachs has halved its forecast of two interest cuts before the end of the year to one given the rise in “investment spending, taxation, and borrowing” in yesterday’s Budget.

The US investment bank points out that Chancellor Rachel Reeves will lift day-to-day departmental spending by £48.8bn by 2029 and raise taxes by £31.9bn over five years.

She also changed the government’s debt rules, to target public sector net financial liabilities target, allowing the administration to raise investment spending by £21.6bn in 2029.

The Bank of England’s rate-setting Monetary Policy Committee meets twice more this year – on 7 November and 19 December – with most in the City expecting a 0.25% cut this month and many hoping for another similar cut before Christmas.

Bank rate is currently 5%, and was last cut in August, which was the first reduction in four years. Inflation is currently 1.7%.

But Goldman analyst James Moberly says in a note to clients: “We expect the Monetary Policy Committee to incorporate today’s budget news into the November monetary policy report’s projections through a material upgrade of its near-term growth forecast and a modest increase in its 2025-26 inflation forecasts.”

Moberly adds: “We believe a 0.25% cut on 7 November remains likely given previous communication and faster-than-expected progress on inflation.

“That said, prospects for stronger 2025 growth are likely to reduce the urgency for sequential cuts in the near term and we now expect the Monetary Policy Committee to hold Bank rate in December.”

Goldman had forecast a 0.25% cut before the budget earlier this month.

Moberly points out: “Looking into 2025, we maintain our forecast for sequential cuts from February as inflation cools but now forecast Bank Rate to fall to 3% in November 2025.”

Earlier this month, the US bank had forecast Bank rate to fall to 2.75% in November next year.