UK Inflation Decreases and Market Anticipates Bank of England Rate Cuts

MysteriousZhang · 2026-02-13T11:08:02+00:00

As analysts speculate on potential interest rate cuts by the Bank of England due to declining inflation and weak demand. While a rate of 3.75% is expected in the upcoming decision, the market anticipates a reduction by July, albeit cautiously.

MysteriousZhang

2026-02-13 11:08:02

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As British inflation decreases, market analysts are beginning to consider possible moves by the Bank of England regarding interest rates. According to Peter Goves, a specialist at MFS Investment Management, the path toward rate cuts is becoming clearer in the upcoming periods.

Weak Demand Outlook Reinforces Possibility of Rate Cuts

The declining inflationary pressure, combined with a persistently subdued demand outlook, suggests that the Bank of England may revise its short-term inflation projections downward. Goves highlights that this context creates space for monetary authorities to consider rate cuts. Still, financial markets are pricing in a hold at 3.75% during Thursday’s decision, according to Jin10 data.

Market Already Prices in a Cut in July

Expectations for monetary policy show a clear alignment: according to LSEG data, the market has fully priced in a rate reduction by the Bank of England for July. However, the likelihood of a second cut later this year remains limited among traders. This pricing reflects the view that, although the inflation reduction process is underway, the Bank of England will opt for a gradual approach in future monetary policy decisions.

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