By Devayani Sathyan and Shaloo Shrivastava
BENGALURU, Feb 16 – The Bank of England will cut interest rates in March, according to a majority of economists in a Reuters poll, and is expected to follow up with a second reduction later this year, though they were not sure when.
At its February meeting, the Bank of England held Bank Rate at 3.75% in a knife-edge 5–4 vote — the third straight narrowly split decision by the Monetary Policy Committee. Governor Andrew Bailey, who has switched positions in recent meetings, voted to keep rates unchanged.
The closeness of the vote came as a dovish surprise and conviction around a second rate cut has strengthened alongside financial market pricing. But with inflation still well above the 2% target, economists are divided over whether the next rate cut will come in the second or third quarter.
Over 60% of respondents, 41 of 63, expected the Bank of England to cut Bank Rate by 25 basis points to 3.50% on March 19. The poll was conducted February 10–16.
“We stick to our call for the next Bank Rate cut to come in March and a final rate cut to come in June, taking Bank Rate to 3.25%, broadly consistent with our estimate of neutral,” noted Sanjay Raja, chief UK economist at Deutsche Bank.
Of the rest, 19 economists expected a cut in April, coinciding with the bank’s Monetary Policy Review month. One predicted a June move, one said either April or June and one forecast rates to remain unchanged at 3.75%.
Beyond that, economists were split on whether a second cut will come in Q2 or later in the year, with 27 of 63 expecting it next quarter and 22 in the second half.
“Risks are still skewed to a slower pace of rate cuts. But we remain confident that Bank Rate will be cut twice this year,” noted Raja.
Median forecasts showed rates at 3.25% by end-year. But the 16 Gilt-Edged Market Markers surveyed were split four ways, with one expecting Bank Rate unchanged at 3.75%, four at 3.50%, seven at 3.25% and four at 3.00%.
Asked in an additional question which was more likely, economists were almost evenly split between “one to two reductions” (18) and “two to three” (16).
That caution reflects inflation risks, with 22 of 30 respondents expecting second-quarter inflation to exceed the bank’s February Monetary Policy Report forecast of 2.1%.
“It’s fair to say we were quite surprised at just how low the MPC’s inflation projection is for 2026…We still think headline inflation and even core are more likely to sit around the 2.5% mark all the way through year-end,” said James Rossiter, head of global macro strategy at TD Securities. He expects only one more rate cut, in March.
January consumer price inflation, due to be published on Wednesday, is expected to have slowed sharply to 3.0% from 3.4%, according to a separate Reuters poll.
The BoE expects it to fall closer to the 2% target in April or May because of one-off factors from regulated prices and the November budget.
But BoE Chief Economist Huw Pill cautioned on Friday that underlying inflation remains elevated at about 2.5% a year, which made it inappropriate to cut interest rates further.
Inflation is seen averaging 3.0% this quarter and remaining above the BoE’s 2% target until 2027, according to the poll. The BoE forecast wage growth to slow to 3.3% by year-end, consistent with on-target inflation.
Britain’s economy barely grew in the fourth quarter of 2025, according to data released last week that has some economists raising questions about survey methodology. The economy is expected to expand 1.0% this year and 1.4% next, largely unchanged from the previous poll.
(Other stories from the February Reuters global economic poll)
(Reporting by Devayani Sathyan and Shaloo Shrivastava, Analysis by Jaiganesh Mahesh, Polling by Mumal Rathore, Nushaiba Iqbal; Editing by Jonathan Cable, Ross Finley, Ros Russell)
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