19 March 2026
If you are covering the unanimous decision by the Bank of England to hold interest rates at 3.75%, please find below a comment from Lindsay James, investment strategist at Quilter:
“A lot has changed since the Bank of England last met at the beginning of February. Today had been earmarked as a good chance of a rate cut given the economic woes blighting the UK. However, things have shifted at such a pace that while rates have been held again today in a unanimous decision, and markets are now expecting rates to be raised by at least quarter of a percent this year if not half of one. This is a swift reversal from the two cuts expected this year before the US and Israeli attacks on Iran and a difficult wake up call for those seeking to remortgage in coming months who have seen lower rates vanish in thin air.
“Inflation forecasts too are being revised hastily, indicating that a spike is coming and as such the BoE will have limited scope to stimulate the already sluggish economy and weakening labour market. Even though a rate hike will do nothing to cool the heat of war in the Gulf, memories persist of the aftermath of the 2022 energy shock which saw higher inflation expectations take root, setting off a chain of events with CPI peaking at 11.1% and levels of wage inflation still receding today. The BoE will very much not want that history to repeat itself.
“However, the UK is in a very different position today than it was back then. Interest rates are not at rock bottom, and the ‘transitory’ word isn’t being bandied around this time when it comes to inflation. But this does remain very much a moving picture. Investors still expect oil to be substantially lower within a matter of months, even if the levels in question have seen a step change in recent weeks. Recent attacks on gas fields have quite literally added fuel to the fire, and the longer these rises go on, the more sustained the inflation impact.
“With volatility like this, rate expectations will move yet again before this is over. And we must not also forget the domestic picture. The UK economy is stagnating once more, and with an energy price shock looming for households and employment remaining weak, how much focus does the BoE put on the geopolitical picture when the domestic economy needs help today? It would appear there are concerns about the inflation path with ‘all members standing ready to act’ in order to contain price rises. Interest rates may be held for now, but it seems hikes are likely to be coming.”
