Standard Chartered’s Christopher Graham expects the Bank of England to keep rates unchanged at its 19 March meeting, with a 7–2 split as two members likely back a 25 bps cut. The bank is seen looking through a short-term energy shock while monitoring Middle East risks, softer UK labour data and lessons from 2011 and 2022. Further easing is forecast, but timing is uncertain.

BoE seen on cautious steady hold

"We expect the Bank of England (BoE) to hold rates steady at its 19 March policy meeting with seven members voting for a hold, and two members (likely Taylor and Dhingra) voting for a 25bps cut."

"The minutes will, however, highlight how each Monetary Policy Council (MPC) member is assessing the risks associated with the Middle East conflict."

"While we expect the BoE to look through a short-term energy price shock, the doves may stress the downside risks to economic growth and the hawks are likely to focus more on the upside risks to inflation."

"We think the case for BoE to hike rates is weaker, partly given it has cut rates less aggressively so far in this cycle, and at least some MPC members likely still see rates as restrictive."

"Moreover, the UK labour market has shown more obvious signs of softening, with unemployment climbing steadily since mid-2022, and wage growth slowing since mid-2023 (the next batch of data is to be released on 19 March, prior to the BoE meeting). Lessons from 2022 and 2011 could shape the BoE’s reaction function."

"We still see more easing from the BoE (we forecast a terminal rate of 3.00%), but the timing of those cuts are highly uncertain and under review – while a near-term cessation of hostilities and a retrenchment in energy prices could allow our current schedule of cuts (once per quarter from Q2) to play out, there are increasing risks that a prolonged energy price spike could push the next cut back into H2 or 2027."

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