2026-02-05 08:46:00
The Bank of England (BoE) is widely expected to hold the Bank Rate steady at 3.75% with a 7-2 vote split (Dhingra and Taylor to dissent in favour of a 25 bps cut). The guidance is expected to remain mostly unchanged and the focus will be mainly on individual members’ views and the agents’ pay survey. The BoE will also release the updated macro forecasts at this meeting.
The central bank is expected to keep the “gradual downward path” guidance and the newly added “judgements around further policy easing will become a closer call”.
There’s also a high consensus for a 6-3 vote split with Ramsden joining Dhingra and Taylor, but analysts expect him to do so only if wage growth in the Agents’ Pay Survey surprises to the downside (expected at 3.5%). In fact, in December Ramsden said that elevated forward-looking surveys of wage growth gave him pause for
thought and that he was focused on the Agents’ Pay Survey data.
The data in January hasn’t been pointing to urgent actions on monetary policy. We got a fairly good jobs report and slightly higher than expected services inflation. The most notable release that triggered a slightly hawkish repricing in interest rate expectations was the UK PMI data which showed strongest upturn in UK private sector business activity since April 2024. The agency also noted that high staffing costs were again widely reported as a key cause of higher selling prices, hinting at an intensification of price pressures at a level above the Bank of England target.
Overall, it should be a fairly straightforward decision with no major surprises. The only potential surprise could come from the Agents’ Pay Survey which is expected to show wage growth at 3.5%. An upside surprise could trigger a hawkish repricing and give the GBP a boost, while weighing on the FTSE 100. On the other hand, if we get a downside surprise, we should see traders increasing probabilities for a second cut by year-end and adding pressure on the pound while supporting the stock market.
