United Kingdom: Central Bank holds rates in February
Bank resumes rate cuts after brief pause: In early February, the Central Bank voted to keep the bank rate at 3.75%, following cuts of 150 basis points from August 2024 to December 2025. Four of nine committee members voted to reduce rates further.
Bank takes cautious approach: The Bank likely decided to take a wait-and-see approach to evaluate the impact of past monetary easing before embarking on further cuts, particularly in a context of inflation still persistently above the 2.0% target.
More easing to come: The Central Bank said that the bank rate was “likely to be reduced further”. This matches the prevailing opinion among our panelists: Virtually all panelists see at least one more rate cut between now and the end of 2026.
Panelist insight: On the outlook, ING analysts said:
“The [February] decision unquestionably boosts the chances of a March rate cut, which is a bit of a surprise. Not much has changed in the economic data since the December meeting, where the Bank cut rates but signalled it could slow the pace of easing. Instead, it seems those voting for another cut this month were swayed not by the data but by new analysis contained in the accompanying Monetary Policy Report. That analysis states that the rate of wage growth, which is consistent with the 2% inflation target, is around 3.25%. That’s barely below current rates of private sector pay growth of 3.6%, which we expect to drop to 3% within months.”