Think tank expects next rate change in April as MPC weighs wage data and weak growth
Oxford Economics expects the Bank of England’s Monetary Policy Committee (MPC) to leave Bank Rate at 3.75% at its meeting next week, arguing that members will want more evidence on wage pressures before cutting again.
“We expect the Bank of England's Monetary Policy Committee to hold Bank Rate at 3.75% at next week's meeting,” said Edward Allenby, senior UK economist at Oxford Economics. “The majority of MPC members anticipate further rate cuts will be required, but they're concerned about the potential strength of 2026 pay awards and their impact on inflation.”
Michael Saunders, senior economic adviser at Oxford Economics, said the MPC was still likely to reduce rates later this year, but not immediately. “But, having cut in December, the Committee probably will not cut at the upcoming February meeting,” he said.
Allenby described the current backdrop as difficult for policymakers, with weak growth coinciding with persistent inflationary pressures. “The current bout of mild stagflation is likely to keep the committee divided on the timing of these future cuts, encouraging a gradual approach to loosening policy further,” he added.
Oxford Economics projects that the next likely reduction in Bank Rate will come at the MPC’s April meeting, provided forthcoming data give the committee more confidence that pay growth is cooling. The firm expects pay settlement figures to be central to the timing and scale of future cuts, as the MPC seeks to support activity without allowing domestic inflation to become entrenched.
“We see the end-April meeting as the most likely timing for the next cut,” Allenby said. “By then, the MPC should have a clearer view of the pay awards and whether this is further evidence of slack emerging in the economy.”
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