Standard Chartered economists Christopher Graham and Saabir Salad argue that stronger UK activity data in early 2026 raises questions about how quickly the Bank of England will cut rates. They still expect a March cut and see scope for three reductions this year to a 3.00% terminal rate, but warn that a stronger recovery, domestic politics and trade risks could alter this path.

BoE easing path faces growth risks

"The pick-up in UK economic activity data since the start of the year calls into question whether the Bank of England (BoE) will be as willing to cut interest rates at its next policy meeting in March."

"On balance, we think recent labour market and inflation data should provide sufficient justification for another cut, with the unemployment rate once again rising in December and wage growth continuing to slow."

"Meanwhile disinflation resumed in January, and headline inflation is likely to fall sharply in April, which should help justify a further rate cut by the June policy meeting."

"Although we still see scope for three more rate cuts down to a terminal rate of 3.00% by year-end, a stronger recovery is a key risk to this view, and the third of our rate cuts this year remains a close call, likely to be shaped by whether the improvement in economic momentum proves sustainable."

"Domestic political risk related to any near-term leadership challenge (especially following local elections on 7 May) and renewed trade uncertainty from changes in US tariffs could upset the improvement in sentiment."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)