BoE to hold rates but any signs of confidence over inflation could raise bets of April cut

Matthew Ryan, CFA Ebury

Sterling briefly made a march towards the 1.39 level on the dollar last week, before ending trading on Friday back below the 1.37 threshold. The pound was almost entirely at the mercy of the dollar last week, although we could see some activity surrounding Thursday’s Bank of England announcement.

We expect no change in rates, and with the hawks and the doves similarly entrenched in their respective camps, another 5-4 voting split is entirely possible, with governor Bailey continuing to act as the sole swing voter.

Arguably of greater importance will be Governor Bailey’s press conference - his first of 2026.

For now, we expect him to keep his cards close to his chest, reiterating that the timing of further cuts will be contingent on upcoming inflation data.

Markets are not fully pricing in the next 25bp cut until July, but any sense that the MPC is increasingly confident on achieving its inflation target could raise bets in favour of another rate reduction as early as the April meeting.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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