A Reuters poll held on 10–16 February found economists largely expect the Bank of England to cut rates by 25 basis points at its March meeting. The survey included 63 economists, with 41 forecasting the Bank Rate will fall to 3.50% on 19 March.
Another 19 economists expect the first cut in April, in line with the Monetary Policy Review. One expects a cut in June, one is unsure between April or June, and one expects the Bank Rate to stay at 3.75%.
Year End Rate Forecasts
For the rest of the year, forecasts were split on whether a second cut comes 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 nearer its 2% target in April or May, 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, mainly by changing base lending rates. It can also use quantitative easing, which tends to weaken sterling, or quantitative tightening, which tends to support sterling.
With a strong consensus forming around a Bank of England rate cut, we see the market pricing this in heavily. Overnight index swaps are currently implying an 85% probability of a 25-basis-point cut to 3.50% at the March 19th meeting. This sentiment is driven by the majority view of economists who see the central bank acting decisively.
Implications For Traders
The economic data supports this dovish shift. We have just seen the January CPI figure come in at 2.4%, continuing the disinflationary trend observed throughout 2025. This, combined with stagnant Q4 2025 GDP growth of 0.0%, gives policymakers both the room and the reason to begin easing monetary policy.
For traders, this means the path of least resistance for the Pound Sterling is likely downwards. After the aggressive rate hiking cycle we experienced to combat post-pandemic inflation, this policy reversal puts GBP at a disadvantage against currencies whose central banks may hold rates for longer. We are positioning for further weakness in pairs like GBP/USD.
Given that the March cut is almost fully priced in, the immediate opportunity in interest rate derivatives may be limited. The focus should shift to the path beyond March, as betting on a faster or slower pace of subsequent cuts offers better value. Options strategies that would profit from a surprise hold in March could also be an effective, low-cost hedge against the consensus.
Volatility in the Pound is expected to increase as we approach the mid-March meeting date. Traders should look at options on GBP crosses to capitalize on the expected price swing following the announcement. The key will be to watch upcoming labor and inflation data closely, as any unexpected strength could quickly unwind these rate cut expectations.
