Economy April 21, 2026 07:58 AM

Economists See Bank of England Keeping Rates Unchanged Through 2026 Amid Inflation Upside

Reuters poll respondents largely expect Bank Rate to stay at 3.75% as elevated inflation and stagflation risk complicate policy choices

By Jordan Park
Economists See Bank of England Keeping Rates Unchanged Through 2026 Amid Inflation Upside

A recent Reuters poll of 62 economists found unanimous expectations that the Bank of England will leave Bank Rate at 3.75% on April 30, with a majority forecasting no further moves through the rest of the year. Forecasters raised their near-term inflation outlook and flagged a heightened risk of stagflation, but many still judge tighter financial conditions and recent market moves sufficient to warrant a cautious, wait-and-see approach.

Key Points

  • All 62 economists polled expect the Bank of England to hold Bank Rate at 3.75% on April 30, with 33 of 62 forecasting no rate change for the rest of the year.
  • Forecasters raised inflation expectations - the poll median sees inflation averaging 3.2% and official data were expected to show March inflation at 3.3% - while nearly 75% of respondents cut their growth forecasts to a median of 0.7% for the year.
  • A majority of economists flagged a high or very high risk of stagflation, influencing the preference for a cautious, wait-and-see policy stance; sectors most directly affected include fixed income markets, banking, and consumer-sensitive industries exposed to energy costs.

Lead

Economists polled between April 16 and April 21 overwhelmingly expect the Bank of England to keep its Bank Rate at 3.75% at its April 30 meeting and to maintain that level for the remainder of the year. The 62 respondents to the poll broadly preserved the same steady policy outlook they held a month earlier, even as they raised their forecasts for inflation.

Policy stance and market context

Financial markets had rapidly priced in the possibility of several rate hikes last month amid concerns that a surge in energy costs linked to the U.S.-Israeli war with Iran would force a policy response. Poll participants, however, did not pivot in the same direction and have largely held to their earlier judgement that the central bank is likely to hold rates steady.

Bank of England officials are charged with returning inflation to the 2% target. Poll respondents said inflation was already well above that benchmark before the latest conflict-driven energy shock and is expected to rise notably in the coming months before easing back early next year, according to the poll results.

BoE Governor Andrew Bailey said earlier this month that investors should not necessarily assume further rate hikes. Many forecasters appear to be taking that guidance at face value, given that financial conditions have tightened significantly following market moves that accompanied the recent geopolitical shock.

Poll outcomes and outlook

All 62 economists surveyed anticipated no change at the Bank of England's April 30 meeting, leaving Bank Rate at 3.75%. Roughly 53% of respondents - 33 of 62 - now expect that rate to remain unchanged for the rest of the year. That distribution was similar to the results of the March 20-26 survey.

Within the sample, 14 economists expected at least one rate increase before year-end, while 15 anticipated one or more cuts. By contrast, in the March poll fewer than 10% of respondents expected a hike and about one-third predicted a cut.

Investec economist Ellie Henderson summarized the prevailing view: 'What the BoE is saying is, "Look, we’ve already got a policy that is restrictive". Unless we see the likelihood of this inflation surge impacting longer-term expectations, then maybe the appropriate policy path is just to hold and wait and see and not rush to raise rates, particularly as this could just be a one-time price shock.'

Inflation trajectory and data expectations

Poll participants revised up inflation forecasts. The median expectation from the survey was that inflation would average 3.2%. Official data due on Wednesday were expected to show headline inflation rising to 3.3% in March from February’s 3.0%, a move the poll suggested was unlikely to materially change the rate outlook.

More than half of contributors who took part in both the April and the late-March polls - 11 of 21 - raised their 2026 inflation forecasts, by over 0.4 percentage points on average.

Growth, bond markets and tighter conditions

Nearly 75% of respondents trimmed their growth forecasts for the year, with the poll median for GDP growth now 0.7% versus 1.0% in March. The International Monetary Fund also reduced its UK growth projection recently to 0.8% from 1.3%.

Market developments following the onset of the Middle East conflict were seen by some economists as equivalent to a substantive tightening of monetary conditions. Laurence Mutkin, head of EMEA rates strategy at BMO, said: 'The move we saw in the bond markets after the beginning of the war was already a great big tightening of monetary conditions. And hopefully, that will be enough to keep inflation pressures low.'

Stagflation concerns and policymaker caution

When asked directly about the likelihood of stagflation - a combination of sluggish growth, rising unemployment and persistent price increases - a majority of respondents viewed the risk as elevated. Seventeen of 22 economists answering that question described the risk as high or very high; five said it was low.

That perceived trade-off - where using rates to tackle inflation could worsen growth and employment outcomes - provides an additional rationale for a measured policy response, according to the poll. BMO’s Mutkin observed that the economy had become more stagflationary since the Middle East war began, noting earlier signs of excessive inflation alongside a softening labour market and saying the energy shock had intensified that tendency.

On the Monetary Policy Committee itself, members offered differing tones. BoE Chief Economist Huw Pill, one of the more hawkish voices on the committee, warned that a wait-and-see posture could be misinterpreted as neutrality regarding higher inflation risks.

Implications

The collective message from the poll was one of caution: forecasters revised up inflation projections, trimmed growth expectations, and flagged heightened stagflation risk, yet still expect the central bank to maintain Bank Rate at its current restrictive level. That stance reflects a balancing act between not overreacting to a potentially transitory energy-driven price shock and acknowledging tighter financial conditions created by recent market moves.


Additional notes

The poll captures the views of 62 economists from April 16 to April 21 and provides a snapshot of evolving expectations for inflation, growth and policy amid a shifting geopolitical and market landscape.

Risks

  • Higher and more persistent inflation: Survey participants raised inflation forecasts and expect a near-term rise in headline inflation, which could pressure real incomes and sectors sensitive to input costs, such as consumer goods and energy.
  • Stagflation risk: 17 of 22 economists judged the risk of stagflation as high or very high, posing downside risks for growth-sensitive sectors including retail, real estate and labour markets.
  • Financial market tightening: Large moves in bond markets since the start of the Middle East conflict have already tightened monetary conditions, potentially amplifying stress in fixed income and banking sectors if funding conditions remain constricted.

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