"The Bank of England kept interest rates unchanged with a narrower than expected 5–4 vote split, as recent data strengthened the case for the Bank to maintain its gradual approach to cutting interest rates. Improved growth sentiment has given the Bank more time to assess the balance of risks to the inflation outlook."
“Today’s decision was accompanied by an updated set of forecasts, with the Bank now expecting inflation to return to target by the end of Q2 2026. The downward revision in inflation largely reflects the impact of the measures announced in the Autumn Budget, which will see energy prices ease from April onwards. However, domestic price pressures remain elevated, and recent surveys suggest pay settlements remain an upside risk for underlying inflation. This was arguably a key factor in the decision to hold rates steady, despite the improved near-term inflation outlook."
“The minutes underscore the wide range of views on the MPC, with the committee remaining deeply split. New data over the coming months should support the case for a gradual easing of rates. The labour market for example, is expected to continue to soften which will help moderate underlying price pressures. We expect the Bank to cut interest rates twice in 2026, taking the Bank rate down to 3.25%.”
