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UK Interest Rates Hold Steady Amidst Global Turmoil
26 Mar
Summary
- Bank of England likely to keep Bank Rate at 3.75% for the year.
- Economists predict rates will remain steady, differing from market views.
- Inflation forecasts revised up due to surging energy prices.
Economists polled by Reuters indicate a narrow majority believe the Bank of England will hold its Bank Rate at 3.75% through the end of 2026. This marks a significant shift from previous forecasts, with most economists now abandoning expectations for rate cuts and disagreeing with financial markets predicting multiple hikes this year. The conflict in the Middle East has sharply increased energy prices, complicating the outlook for British inflation and prompting a rethink of interest rate trajectories.
Inflation forecasts have been revised upwards, with predictions now averaging 2.8% for the next quarter and climbing to 3.4% in the latter half of 2026. This contrasts with earlier expectations of around 2.4%. Major financial institutions have altered their outlooks dramatically, with some erasing previous forecasts for rate cuts and instead predicting hikes. Despite the market's aggressive stance, many economists believe the Bank will wait for more evidence of persistent inflation before considering any rate changes.
