Market participants expect Bank Rate cuts and inflation near target

Market participants surveyed by the Bank of England anticipate a series of Bank Rate reductions over the next year.

The median expectation for the 30 April 2026 Monetary Policy Committee (MPC) meeting is 3.5 percent, a decrease from the current 3.75 percent.

This downward trend continues, with the median forecast reaching 3.25 percent by November 2026.

Looking further ahead, the median expectation for the Bank Rate remains at 3.25 percent for both one year (March 2027) and two years (March 2028) into the future.

Probability distributions for the upcoming MPC meetings reinforce these expectations, with a significant shift towards lower rates by April.

Participants primarily base their Bank Rate expectations on their perceptions of the global outlook (42.5 percent) and the UK outlook (31.2 percent), with MPC communications accounting for 21.1 percent of their weighting.

Expectations for CPI inflation indicate a return towards the Bank of England's 2 percent target.

The median forecast for CPI inflation is 3.0 percent by the end of Q1 2026, falling to 2.4 percent by the end of Q2 2026.

One year ahead, the median expectation is 2.0 percent, with a high probability (31.8 percent) assigned to the 1.81%-2.20% range.

Economic growth is projected to be moderate, with median GDP forecasts of 1.0 percent for 2026, rising to 1.3 percent in 2027 and 1.4 percent in 2028.

Risks to the outlook are varied; global shocks are seen as having a large upside (38 percent), while risks from consumption and labour demand are predominantly viewed as a small downside (51 percent).