Headline: Economists Suggest Interest Rates in the UK May Decline Sooner Than Expected

According to economists, it is likely that interest rates in the UK will fall more quickly than previously anticipated. However, the first budget to be announced by the Labour government at the end of the month will be crucial as market participants wait to assess the economic impact. As of Tuesday, money markets have fully priced in a quarter-point rate cut by the Bank of England at its next meeting in November and assigned a high probability to a similar cut at the December meeting. Current pricing indicates that rates will drop to 4% by the May 2025 meeting and to 3.5% by December 2025. Nevertheless, Goldman Sachs economists predict that rates will fall "quite below market pricing." This is based on their calculation of the neutral real interest rate for the second quarter of 2024 at 0.8%, the rapid decline in UK inflation, and dovish comments from BOE policymakers. Consequently, they anticipate consecutive 25 basis point cuts that would bring the Bank Rate to 3% as early as September 2025, and to 2.75% by November of the following year.