The Bank of England's recent decision to maintain rates at 3.75% has increased the likelihood of a rate cut in March, according to ING. The decision was influenced by new analysis in the Monetary Policy Report, which suggests that wage growth is nearing the target inflation rate. ING analysts expect further cuts in June, bringing rates down to 3.25%. The report also highlights political pressures affecting the Pound.

BoE decision raises rate cut expectations

"Another heavily divided Bank of England decision lowers the bar for a rate cut next month. So long as the data continues to follow recent trends – weaker employment, lower wage growth, easing inflation – then we think a March cut is likely to be followed by another in June."

"The decision unquestionably boosts the chances of a March rate cut, which is a bit of a surprise. Not much has changed in the economic data since the December meeting, where the Bank cut rates but signalled it could slow the pace of easing."

"Our view is that headline inflation should fall to 1.8% in April and stay around 2% through the spring/summer. That’s slightly below BoE forecasts."

"We continue to see it trading up to 0.88 over the coming months as both softer UK short-dated yields and local politics weigh."

"We expect political uncertainty to dominate. And we have an EUR/GBP forecast at 0.90 by year-end as some continued euro strength wins through on our expected rebound in European growth."

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