Investors questioned in a recent Bank of England Market Participants Survey expect the central bank to lower its Bank Rate to 3.0% by the March 2027 meeting, down from the current level of 3.75% set at the most recent policy decision.
The survey, carried out between January 21 and January 23 and receiving 92 responses, reflects the view that the Bank of England will implement a gradual path of reductions in borrowing costs. At the same time, officials on the Monetary Policy Committee voted 5-4 to hold the Bank Rate at 3.75% but indicated that additional cuts could follow if a projected decline in inflation appears to be durable.
Market pricing, as measured by LSEG data, shows traders are almost fully pricing in two further quarter-point rate cuts during 2026 in response to the BoE's decision, yet those market-implied moves do not extend to the 3.0% low predicted by survey respondents for March 2027.
The survey also reported that the median expectation for the scale of the Bank's quantitative tightening over the 12 months beginning in October remains unchanged at 50 billion pounds. That figure is the same median estimate published in the central bank's prior survey in November.
On longer-term bond markets, the Market Participants Survey raised its median forecast for 10-year gilt yields, with respondents expecting that instrument to finish 2026 at 4.25%. That marks an increase from the 4.0% median projection reported in the November survey.
Respondents' collective views captured by the survey underscore a divergence between the Bank's conditional guidance and market pricing. Policymakers emphasized they will be guided by how persistent any fall in inflation proves to be, leaving the timing and extent of eventual cuts contingent on incoming inflation data.
Data points from the survey
- Survey period: January 21-23.
- Number of respondents: 92.
- Median expected Bank Rate by March 2027: 3.0% (from 3.75%).
- Median expected quantitative tightening over 12 months from October: 50 billion pounds (unchanged).
- Median expected 10-year gilt yield at end-2026: 4.25% (previously 4.0%).