BoE: Robust data challenges the easing trajectory – Standard Chartered

Stronger UK Economy May Delay BoE Rate Cuts

According to Standard Chartered economists Christopher Graham and Saabir Salad, recent signs of increased economic activity in the UK at the start of 2026 have cast doubt on how swiftly the Bank of England might lower interest rates. While they continue to anticipate a rate reduction in March and foresee the possibility of three cuts this year, potentially bringing the rate down to 3.00%, they caution that a more robust economic rebound, domestic political developments, and trade uncertainties could influence this outlook.

Growth Trends Complicate BoE’s Easing Plans

The recent improvement in UK economic indicators raises uncertainty about whether the Bank of England will proceed with a rate cut at its upcoming March meeting.

Despite this, the economists believe that the latest data on the labour market and inflation should support another rate reduction. Unemployment edged higher in December, and wage increases have continued to moderate.

Additionally, the return of disinflation in January, along with expectations for a significant drop in headline inflation by April, could provide further justification for a rate cut by the June meeting.

Although three rate cuts are still seen as possible this year—bringing the terminal rate to 3.00%—the likelihood of the third cut remains uncertain. Whether the current economic momentum is sustained will be a key factor in determining the path of monetary policy.

Other risks include potential political instability, such as leadership challenges following the local elections on May 7, and renewed trade tensions stemming from changes in US tariffs, both of which could dampen the recent improvement in market sentiment.

(This article was produced with assistance from artificial intelligence and reviewed by an editor.)