At its last meeting on 1 February, the MPC had a three-way split: six members voted to hold the base rate at 5.25 per cent, two voted for a rise and one for a cut. A split vote indicates that rates may be held in March as well.
Steve Matthews, investment director at Canada Life Asset Management, said: “With the Bank of England expected to hold interest rates later this week, all eyes will be on the committee’s remaining two hawks – Jonathan Haskel and Catherine Mann – who voted for a rate hike in February.
“If both Haskel and Mann shift to hold, it could signal that a June cut is potentially on the cards. However, they retain ongoing concerns, repeated by Mann last week, over the tight labour market and UK wage growth settlements still outpacing inflation, despite it slowing again in the three months to January. The surprising inflation data from the US last week will also be front of mind.
“In turn, the market will also be looking to see if more committee members decide to join Swati Dhingra, who was the first to call for an immediate cut last month. Unless we see something seismic in Wednesday’s inflation data, we still expect Dhingra to remain an outlier, with the majority of the committee wanting to see the data get very close to and stabilise around two per cent before they join the ‘cut’ party.”
The UK inflation rate has fallen significantly from the record inflation rate recorded in October 2022, when it hit a 12-year high of 11.1 per cent.
In the 12 months up to January, the Consumer Price Index (CPI) measure of inflation was four per cent; on a monthly basis, the CPI fell by 0.6 per cent in January 2024, the same rate as a year ago.
Experts generally expect February’s figure to be lower than in January. Capital Economics has predicted that the inflation rate could fall to about 3.3 per cent, while S&P Global Market Intelligence forecasts a rate of about 3.6 per cent.
In its Monetary Policy Report in February, the BoE said inflation would hit its two per cent target in April, but then could rise again.
Andrew Bailey, the bank’s governor, said there had been “good news” on inflation in recent months, but that the committee needed to see more evidence that inflation will fall “all the way to the two per cent target, and stay there” before it can reduce interest rates.
