BoE Interest Rate Prep

On Thursday the 30th of April, at 07:00 ET, the Bank of England reveals their decision from it’s latest monetary policy meeting, and releases the rate statement.
Here are some views on what to expect.

Expectation from Analysts and Market Participants forecast the BoE to hold rates steady at 3.75%, unchanged from the prior rate. With the high and low ranges supporting this.

Investment Bank Commentary
Wells Fargo
When Bank of England (BoE) policymakers meet next week, we expect that they will keep the Bank Rate on hold at 3.75%. The Monetary Policy Committee’s guidance is likely to continue emphasis on optionality and data dependence, particularly if second-round effects become more pronounced. We expect growth projections to be revised lower and near-term inflation forecasts higher as the energy supply shock reintroduces upside risks to headline persistence, with longer-horizon forecasts largely unchanged. It would take a notably sharp upgrade to the growth outlook or medium-term inflation forecasts well above the 2% target to shift our view toward a tightening cycle this year.

For now, the bar for a rate hike remains high. Wages are still soft, and while the unemployment rate surprised to the downside at 4.9% (vs 5.2%), the drop largely reflected lower participation rather than a meaningful pickup in employment. March inflation came in high but reflected the direct shock of higher fuel prices rather than anything out of the ordinary. And even though April PMIs surprised to the upside, anecdotal evidence suggests the stronger pace of expansion partly reflects a short-term boost from firms and households pulling purchases forward amid feared price rises and war-related supply shortages. This pace is unlikely to be sustained if price levels remain high. We therefore see the BoE on hold in 2026, particularly with the policy rate already restrictive and at the top of the bank’s estimated 2.75%-3.75% neutral range. That said, risks are skewed to the hikes, especially if services inflation continues to accelerate and feed through into wages.

Goldman Sachs
We expect the MPC to hold Bank Rate at 3.75% at next week’s (April 30) meeting given signs of a de-escalation of the conflict in the Middle East and comments from Governor Bailey suggesting that it is too soon to judge the impact of higher energy prices. While recent data point to significant indirect effects as companies pass through increased fuel costs, we do not think this will dissuade the Committee from a “wait-and-see” strategy at this meeting given limited evidence so far of second-round effects via wages. An 7-2 vote looks most likely, with Chief Economist Pill and external member Greene preferring a 25bp hike.

We think the updated MPC projections will show headline inflation rising notably to around 3.4% in 2026H2 given higher energy prices, but dropping below target to 1.7% by the end of the forecast horizon because of a higher conditioning path for Bank Rate. We expect the growth projection to be lowered by around 0.8pp cumulatively over the forecast horizon. The policy projections are likely to show a mixed picture, with the optimal policy path pointing to near-term tightening but the forward-looking Taylor rule indicating slightly looser policy.

The latest commentary from MPC members suggests that the Committee will probably want to keep its options open for the upcoming meetings but adopt a more measured tone than in March to limit the risk of a sharp market reaction. One option would be for the Committee to indicate that it remains ready to act as necessary to keep inflation on course to reach the target but emphasise in the policy summary that the stance is already somewhat restrictive.

Looking ahead, we expect the MPC to remain on hold in 2026 as the Committee balances elevated headline inflation with a weaker labour market and an already restrictive policy stance, before cutting Bank Rate in 2027. The risks around our baseline view are clearly tilted in a hawkish direction, but on a probability-weighted basis our forecast is somewhat lower than the market-implied path for the rest of this year and more materially below pricing in 2027.

Danske Bank
We expect the Bank of England on hold on 30 April. We pencil in no rate changes for the coming 12 months but with risks tilted towards hikes. Data has come in mostly on the hawkish side since March as the economy has weathered the energy blow better than expected. Like consumer sentiment, it could still turn sour, though.After the BoE’s hawkish turn in March, investors quickly started to price in near-term hikes but from mid-March to mid-April much was priced out again not least because Governor Bailey has been quite clear that the BoE is in no rush. During the recent week, pricing has taken another turn on the back of deteriorating energy markets and macro data coming in mostly on the hawkish side.

Starting with the soft data, April consumer sentiment declined for a third consecutive month, suggesting solid retail sales growth in March is probably not fully reflecting consumers reaction to the energy shock. The salary index in the KPMG and REC report on jobs ticked lower in March and the freshest part of the official labour market report also showed 11K jobs were lost in March while February was revised lower pointing to lower payrolls after the recent release had shown signs of improving.

On the other hand, the more outdated part of the report shows that a worrying increase in unemployment has reversed with a 0.3 percentage point decline in February to 4.9% and the trend for lower wage growth not as strong as expected. Furthermore, the UK headed into the energy crunch with surprisingly strong momentum, as the service sector drove 0.5% mom GDP growth in February. April PMIs suggest the economy has remained afloat with the service sector even accelerating leaving composite PMI at a solid 52, much stronger than expected. Price indexes increased a lot, mostly for input prices but also the output price index has crossed 62 levels its highest since early 2023. Core inflation edged lower in March slightly below expectations, but service inflation rebounded to 4.5%, clearly too high.

BoE call. Even if recent data has come in quite solid, the UK labour market is much cooler and the starting point for the Bank Rate at 3.75% is much higher compared to 2022. Hiking rates will have to be weighed against a considerable risk of exacerbating a looming economic contraction. We think it is most likely the BoE will remain sidelined for the foreseeable future.

Market reaction. With the hawkish repricing in mind, we see risks slightly tilted towards a more dovish stance, supportive for EUR/GBP. We think the BoE is most likely to refrain from pushing back too much on market pricing, though. We forecast EUR/GBP to move higher towards 0.89 on a 6-12-month horizon.