A Reuters poll of 64 economists finds the Bank of England on track to hold its key rate at 3.75% for the rest of the year, even as inflation is forecast to climb above 3%. Three of nine Monetary Policy Committee members already back an immediate hike, up from two the previous meeting, while a narrow majority still expects a cut by mid-2027.
Nearly nine in ten economists polled by Reuters expect the Bank of England to hold its key interest rate at 3.75% through the rest of the year, even as inflation risks build. The central bank has held the same view since the U.S.-Israeli war on Iran began in late February, with the UK economy showing little sign of spillover from higher energy prices.
Rate-hold view solidifies
56 of the 64 economists surveyed expect the Monetary Policy Committee to leave rates unchanged this year, up from 83% last month. Six respondents still expect a hike by year-end, and two forecast a cut. Financial markets, however, are still pricing in one quarter-point rate rise by year-end. No economist forecast a rate change at the September meeting.
MPC dissent grows
Three of the nine Monetary Policy Committee members voted for an immediate rate hike to 4.0% at the July meeting, up from two at the previous meeting. Inflation likely rose to 2.9% in July from 2.6% in June, moving further above the Bank's 2% target, according to a separate Reuters poll ahead of official data due Wednesday. The Bank's own quarterly forecasts point to inflation rising above 3% later this year.
Elizabeth Martins, UK economist at HSBC, said "a big rebound in energy prices would certainly change things", adding that the real game changer for the MPC, in her view, is second-round effects. Weak hiring and pay growth in the latest labour-market data still sit within the MPC's tolerance range, a factor economists said is likely to keep policymakers on the sidelines for now.
Majority sees a cut by mid-2027
A narrow majority of economists expect at least one rate cut by the middle of 2027, even though inflation is forecast to stay above 2% until late next year. The survey put UK economic growth at 1.1% in 2026 and 1.2% in 2027, before accelerating to 1.5% in 2028.
Source: Investing.com
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