DIY investors expect interest rates to fall to around 2.7% by the summer, according to new research from Charles Stanley Direct.
Despite inflation reaching 3.4% in December, exceeding the 3.3% consensus forecast, investors remain optimistic that further rate cuts will occur over the next six months, with the majority of investors expecting rates to reach between 2.5% and 2.75% in June 2026.
However, 14% of DIY investors expect interest rates to be between 3.1% and 3.5% by June, while one in 10 (11%) are anticipating rates to hit between 3.6% and 4%.
Charles Stanley Direct’s research also looked at where investors think UK inflation will be in six months’ time. On average, investors think it will be 2.45% by June, a significant decrease from the current rate.
Figures published on Wednesday showed that progress on price pressures remained slow in the run-up to Christmas, with inflation rising to 3.4% last month, driven by seasonal factors such as higher Christmas travel costs and increased tobacco duties.
Just 7% of DIY investors think inflation will stay in the range of 3.6%-4%, while around one in seven (15%) think it will ease to 2.1%-2.5%.
At the other end of the spectrum, 12% of optimistic investors think inflation will measure between 1.6%- 2% in six months’ time, surpassing the Government’s target. Overall, 36% of DIY investors think inflation will be 2% or lower.
Rob Morgan, chief investment analyst at Charles Stanley Direct, said: “The nation has been on quite a journey with both interest rates and inflation figures in the past few years, especially with rising costs for businesses driving higher prices paired with sluggish GDP figures.
“A rate cut from the BoE is widely anticipated and will bring a much-needed boost to the economy, as well as relief for DIY investors grappling with difficult conditions. While this could spell good news, investors must remember that investing is for the long term; investment strategies should be built on the premise that a certain level of risk is always involved, and nobody has a crystal ball.”
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