**HSBC Predicts Bank of England Will Hold Rates** HSBC believes the Bank of England (BOE) will keep its rates unchanged until April 2026. Previously, they expected cuts to start in November and continue in February. Market views on the BOE have stayed steady, as traders do not predict any cuts in the remaining months of this year. The next expected rate cut is in February 2026, while a significant rate change may happen in March 2024. Inflation risks continue to be a key factor in understanding the UK economy’s financial situation. The upcoming November budget will also be crucial in this analysis. The forecast for UK interest rates has changed. The BOE is now likely to hold rates steady until at least April 2026, pushing back earlier expectations for cuts this year. This means we need to adjust our positions that were betting on reductions soon. This decision is influenced by inflation, which remains above the 2% target. In August 2025, the Consumer Price Index (CPI) was recorded at 2.8%. Furthermore, wage growth is concerning, at an annual rate of 4.5%. This leads us to believe the BOE will remain cautious, unlike in late 2023 when markets anticipated quick rate cuts. **Impact on Sterling and Interest Rate Futures** For those involved in trading sterling interest rate futures, contracts for December 2025 and March 2026 are likely to maintain or increase their implied yields. Therefore, it may be wise to consider paying fixed rates on short-term swaps to align with the “higher-for-longer” reality. The UK’s slow economic growth, which only grew by 0.1% in the second quarter of 2025, does not seem strong enough to push the BOE to act just yet. This situation is different from other central banks that have already started easing, which should help support the pound. A stronger sterling, especially against the euro and dollar, is expected in the medium term. With the November budget approaching, we should prepare for increased volatility, making options strategies appealing to guard against any unexpected fiscal changes. Create your live VT Markets account and start trading now.

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