The Bank of England has maintained interest rates at 3.75%, with Governor Andrew Bailey explicitly endorsing market expectations of a 50% probability for a March rate cut. This alignment between policymaker guidance and market pricing is notable.
The monetary policy committee’s 5-4 vote to hold rates created exactly the market expectations Bailey later endorsed. Financial markets, analyzing the close split and the governor’s comments, assigned even odds to a March cut—an assessment Bailey called “not a bad place to be” when speaking to Bloomberg TV.
This alignment is significant because it suggests the Bank is successfully communicating its policy stance. Markets aren’t expecting certain cuts or certain holds, but rather recognize the genuine uncertainty facing policymakers. This reflects the close balance of arguments on both sides of the rate decision.
Bailey’s willingness to discuss the next meeting’s probability is somewhat unusual. Central bank governors typically avoid explicit commentary on upcoming decisions to maintain flexibility. His endorsement of 50-50 odds suggests he wants markets to understand that the March decision genuinely depends on incoming data rather than being predetermined.
The economic data between now and March will be crucial. Inflation figures for January and February will show whether the expected fall toward 2% is materializing. Labor market data will indicate whether unemployment is indeed rising toward 5.3%. These releases will shift the March probability one way or the other. Chancellor Rachel Reeves’s budget measures, including utility bill cuts and rail fare freezes, take effect in April, so March data won’t yet reflect their impact. GDP growth forecasts of 0.9% suggest a weak economy that might benefit from rate cuts.
