BoE Seen Holding Rates at 3.75% in 2026 as 40% of Economists Now Expect Hikes

3 articles · Updated · Reuters · May 13

A May 11-13 Reuters poll of 56 economists found the Bank of England is still expected to keep rates at 3.75% this year, even as views tilt toward tighter policy.
Nearly 40% now expect at least one rate hike by end-2026, up from 23% in April, after the Iran war pushed up energy prices and lifted inflation forecasts.
Inflation jumped to 3.3% in March and is expected to peak at 3.6% in the fourth quarter, well above the BoE's 2% target; markets are pricing in two increases this year.
Some economists say elevated gilt yields, tighter financial conditions and a loosening labour market may already be restraining demand, limiting the need for aggressive tightening despite rising price pressure.
The split outlook leaves the BoE balancing war-driven inflation risks against weak growth, with GDP forecasts little changed at 0.8% for 2026 and 1.2% for 2027.

With the UK economy weakening, will the central bank risk a deep recession to fight war-fueled inflation?

As war chokes energy supply, can interest rate hikes solve Britain's severe cost-of-living crisis?