BoE Rate Hike Expectations Pushed Back to 2027

Markets have pushed back expectations of a Bank of England rate hike until February 2027, according to market pricing. This follows a decline in gilt yields, which fell by 2 basis points on Thursday to 5.01%. The current base rate of 3.75% has been held at every meeting this year, with the Monetary Policy Committee voting 6-3 to maintain rates in July.

Financial markets have generally priced in an increase, but most economists surveyed by Reuters believe the Bank will hold rates steady throughout 2026. The divergence between market expectations and economist forecasts may be attributed to the risk of an escalation in the US-Iran conflict, as suggested by Governor Andrew Bailey.