Bank of England to hold rates in March, cut twice this year but timing unclear: Reuters poll

Bank of England Expected to Cut Interest Rates Twice in 2024 Amid Inflation Concerns

Outlook on Bank of England Interest Rate Cuts and Economic Implications

By Devayani Sathyan

Timing and Probability of Rate Cuts

BENGALURU, March 12 (Reuters) - The Bank of England will cut interest rates to 3.50% either in April or June, according to economists polled by Reuters who have largely abandoned calls for a March 19 reduction as soaring energy prices driven by the Iran war raise inflation risks. 

Conviction on the outlook has faded, with several economists unwilling to specify at which of the two meetings next quarter the BoE will cut. Some simply delayed previous expectations of a series of cuts and others have wiped out expectations for any further easing.

Uncertainty in Year-End Rate Forecasts

There is no longer a majority view for where rates will end this year, although the median forecast from a Reuters poll taken this week still puts Bank Rate at 3.25% by year-end.

Benchmark British government bond yields have risen around half a percentage point since the war started, while interest rate futures contracts are no longer pricing any cuts this year compared with a 90% chance of a March reduction less than two weeks ago. 

Impact of Middle East Conflict on Inflation Expectations

The Middle East conflict has upended many economists' near-term expectations for inflation, which slowed to 3.0% in January and previously was expected to drift down toward the BoE's 2% target in coming months. Brent crude oil prices are back above $100, after nearly touching $120 earlier this week.

Economist Poll Results

Over 85% of economists, 43 of 50, expected the BoE to keep Bank Rate unchanged at 3.75% on March 19, a reversal from 65% who expected a March cut in a February poll. Seven forecast a cut to 3.50%.  

About 60% of economists, 26 of 43, expect the first cut this year next quarter. Among them, only around 40% specified April's meeting, when the BoE releases its next set of quarterly forecasts.

In the February poll, all but one economist expected Bank Rate to fall at least 25 basis points by mid-year. 

Expert Commentary

"Given the situation we're seeing with oil prices, we now think it's more likely than not they will delay the next rate cut until April, but overall, we're still looking for two cuts from the Bank of England this year," said Dean Turner, an economist at UBS.

"I suspect the bias in the minutes will still point to the need for further easing in due course...I don't think there's any doubt rates are going to fall, it's just by how much and when."

Monetary Policy Committee and Market Division

But in the three meetings before the war began on February 28, decisions by the Monetary Policy Committee were narrowly split. 

Market forecasters appear to be increasingly split on their views too.

Weakening Jobs Market and Economic Forecasts

Labour Market Trends

WEAKENING JOBS MARKET

"If you alternatively believe the BoE will continue easing without a clear and credible path back to the 2% target, you are overlooking their repeated warnings about inflation persistence and their heightened sensitivity after five years of above-target outcomes," said Stefan Koopman, senior macro strategist at Rabobank.

Last week Rabobank removed its forecast for two rate cuts this year to none.

Rate Projections and Unemployment Data

Still, median forecasts from the March 9-12 poll showed rates at 3.25% by end September, unchanged from the previous survey. Of the 46 economists who provided forecasts, 23 see rates at 3.25%, 13 at 3.50%, nine at 3.75%, and one at 3.00%.

One reason many are sticking to their forecasts for easing this year is a weakening job market. Unemployment in the final three months of 2025 rose to its highest in more than a decade outside the pandemic. 

Inflation and Growth Projections

Overall inflation forecasts were largely unchanged from February's poll, suggesting most economists expect the recent spike in oil prices won't last.

Inflation was expected to average 3.0% this quarter and 2.4% next, above the BoE’s Monetary Policy Report projections.

Economic growth was forecast to average 1.0% in 2026 and 1.4% in 2027.

Additional Information

(Other stories from the March Reuters global economic poll)

(Reporting by Devayani Sathyan; Polling by Nushaiba Iqbal, Editing by William Maclean)