The Bank of England is almost certain to hold base rate tomorrow, experts believe, with the institution likely to stay cautious during the rest of 2026.
The Bank’s Monetary Policy Committee (MPC) was widely expected to cut base rate from its current level of 3.75% when it meets on 19 March.
But this assumption changed after the United States and Israel started a war with Iran, which caused an inflationary impact across the world and leading oil prices, swap rates and mortgage prices to rise.
Omnis Investments chief investment strategist Patrick O’Donnell said: “Considering the current environment, it’s highly likely the Bank of England will hold interest rates – a scenario which would have been thought unlikely just three weeks ago.
“Amid the uncertainty of how long the current energy supply shock will last, and therefore how high inflation could go and for how long, the Bank of England will want to play for time and keep its options open.
“Considering its loss of credibility during the last energy shock in 2022, we should expect a more cautious approach from the Bank of England in 2026, favouring holds and delaying cuts to avoid embarrassing backtracking with hikes at all costs.”
Most economists recently questioned by Reuters also believe the Bank will hold rates tomorrow, pointed out Knight Frank global head of research Liam Bailey.
Bailey said: “Economists polled by Reuters mostly expect a 7-2 vote by the Bank of England’s MPC tomorrow to keep the base rate at 3.75%. Before the war began on February 28, a cut to 3.5% was seen as a near certainty.
“The conflict is already weighing on sentiment. Consumer confidence fell to its lowest level since January 2025 during early March, according to S&P Global’s Consumer Sentiment Index. Households were the most downbeat about their financial prospects since December 2024, and and most cautious about making large purchases in 14 months.”
But beyond the March MPC decision the future of the base rate is unclear, according to Nottingham Building Society chief lending officer Aaron Shinwell.
Shinwell said: “The expectation is that the Bank of England will maintain the current base rate of 3.75% this week. However, the path forward is far less clear beyond that.
“Lenders have already begun adjusting mortgage rates in response to heightened market volatility, the longer term outlook still points towards gradual easing once the global situation stabilises.”
