ING Warns GBP Rate Cuts Could Outpace Eurozone in 2025

ING warns that GBP interest rates could fall faster than eurozone rates in 2025, driven by a potential split between the Bank of England (BoE) and the European Central Bank (ECB). ING analysts say the BoE may have greater urgency and room to cut, as UK inflation trends appear to be converging toward the 2% target more quickly in some core categories. Key UK factors cited include weaker growth versus the wider eurozone, different inflation composition (notably services and wage stickiness), and higher housing sensitivity to rates. ING also points to UK-specific productivity and supply constraints, while the eurozone’s more integrated market and fiscal coordination could allow the ECB to stay comparatively tighter for longer. Market impact: a faster easing cycle for GBP could weigh on the GBP/EUR exchange rate and narrow yield differentials between UK gilts and German bunds, reshaping currency and duration positioning. ING notes that rate futures pricing has started to reflect more cuts on the SONIA curve than on the EURIBOR curve for 2025. Timeline context: after synchronized post-pandemic tightening, ING argues the cycle divergence is likely to end, with the UK having started earlier and peaked higher (BoE December 2021 0.25%, ECB 0.00%; later Aug 2023 peak 5.25% vs 4.50%). Bottom line for traders: watch for GBP rate cuts headlines to drive FX volatility and cross-asset risk repricing in 2025.