The Bank of England is expected to hold interest rates at 3.75% today, but mounting signs suggest cuts could follow in the coming months – potentially as early as April – as policymakers weigh conflicting signals from the UK economy.
Members of the Monetary Policy Committee are widely forecast to vote to keep the base rate unchanged at its three-year low, after inflation rose for the first time in five months to 3.4% in December.
Markets are pricing in just a 4.1% chance of a cut at this week’s meeting and a 28% probability in March, following four reductions in 2025, with many investors now seeing April as the most likely window for the next move.
Matt Swannell, chief economic adviser at the EY Item Club, said a hold today was a “near certainty”, noting that some dovish MPC members remain concerned about persistent wage growth and inflation pressures – although he added April was the “most likely time for the next rate cut”.
The latest CPI inflation figure was driven higher by factors including tobacco duties and airfares, a rise economists say is likely to reinforce the Bank’s cautious stance this month.
Aaron Shinwell, chief lending officer at Nottingham Building Society, said: “Mortgage rates are now at their lowest levels since 2022, creating real opportunities for anyone looking to buy or remortgage. Although a rate cut this month looks unlikely, rates have already passed their peak and could gradually edge down over time, which good news for the 1.8 million borrowers expected to remortgage this year and first-time buyers finding a more realistic route onto the property ladder.”
“For those still saving towards a deposit, a hold on the base rate provides some stability. Savings rates remain competitive for now, giving people a chance to build their deposit while keeping a close eye on how both savings and mortgage rates change. As rates do ease, that combination of a stronger deposit and lower borrowing costs could make a meaningful difference to affordability.”
The Bank of England’s base rate decision will be announced at midday today.
