A Reuters poll conducted on 10–16 February found that most economists expect the Bank of England to cut interest rates by 25 basis points at its March meeting. The poll surveyed 63 economists. Of these, 41 expect the Bank Rate to fall to 3.50% on 19 March.
Another 19 economists expect the first cut in April, in line with the Monetary Policy Review. One economist expects a cut in June. One is unsure between April and June. One expects the Bank Rate to remain at 3.75%.
Year End Rate Forecasts
For the rest of the year, economists were split on when a second cut might arrive—either in the second quarter or later. The median forecast is for the Bank Rate to end the year at 3.25%.
In its February Monetary Policy Report, the Bank expects inflation to reach 2.1%. It also expects CPI to move closer to its 2% target in April or May. This is mainly due to one-off effects from regulated prices and the November budget.
The Bank of England sets UK monetary policy with a 2% inflation target. It mainly does this by changing base lending rates. It can also use quantitative easing, which tends to weaken sterling, or quantitative tightening, which tends to support sterling.
As expectations for a rate cut strengthen, markets are pricing it in more heavily. Overnight index swaps currently imply an 85% chance of a 25-basis-point cut to 3.50% at the 19 March meeting. This view is supported by the majority of economists, who expect the Bank to act soon.
Implications For Traders
Recent data supports this more dovish outlook. January CPI came in at 2.4%, continuing the disinflation trend seen throughout 2025. At the same time, Q4 2025 GDP growth was flat at 0.0%. Together, these figures give policymakers both room and reason to start easing policy.
For traders, this suggests the British pound may face more downside pressure. After the sharp rate hikes used to curb post-pandemic inflation, a shift toward cuts would likely make GBP less attractive than currencies where central banks may keep rates higher for longer. We are positioning for further weakness in pairs such as GBP/USD.
Because a March cut is already largely priced in, near-term opportunities in interest-rate derivatives may be limited. Focus may shift to what happens after March, where pricing a faster or slower pace of later cuts could offer better value. Options that would benefit from a surprise hold in March can also serve as a low-cost hedge against the consensus.
Pound volatility is expected to rise as the mid-March meeting approaches. Traders may look at options on GBP crosses to take advantage of a likely post-announcement move. The key is to watch upcoming labour and inflation data closely, as any unexpected strength could quickly reduce expectations for rate cuts.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
