Market sees Bank Rate held at 3.75 percent through mid-2027
Market participants expect the Bank of England to maintain Bank Rate at 3.75 percent through July 2027 before gradual cuts toward a 3.25 percent equilibrium. The September survey of 92 institutions also projects £50 billion in annual gilt reductions.
A long plateau at 3.75 percent
A survey of 92 market participants shows strong consensus for near-term policy stability.
Respondents assigned an 86.3 percent mean probability to Bank Rate staying at 3.75 percent at the September 17 meeting and 60.4 percent for November 5. Median projections keep Bank Rate at 3.75 percent through July 2027 before easing to 3.50 percent in late 2027 and 3.25 percent in 2028.
The median estimate for the neutral rate is 3.25 percent, with 44 respondents seeing upside risks versus 10 anticipating downside skew.
Energy and commodity prices represent the dominant driver for near-term rate expectations at a 25.9 percent weighting, followed by realised non-energy inflation at 19.5 percent.
Steady runoffs and sticky inflation
Macroeconomic forecasts point to sticky inflation near term, with annual CPI projected at 3.2 percent in late 2026 before receding to 2.5 percent in one year and 2.0 percent in three years.
GDP growth is expected to remain modest at 1.1 percent in 2026 and 2027.
For the Asset Purchase Facility, respondents anticipate a £50 billion reduction in gilts for the October 2026 to September 2027 cycle, concentrated in short and medium maturities at 44.3 percent and 40.3 percent.
Ten-year gilt yields are projected at 5.00 percent at end-2026, moderating to 4.60 percent by late 2027.
Anchored higher for longer
The survey confirms that market expectations have firmly abandoned hopes for rapid rate cuts.
A prolonged hold at 3.75 percent alongside an upwardly skewed neutral rate reflects deep-seated inflation anxiety.
This tight stance leaves policymakers very little room to stimulate sluggish growth without risking credibility.