Markets expect UK interest rates to bottom out at 3.0% in Q1 2027, BoE survey shows

Investors polled by the Bank of England expect the central bank to steadily cut its main Bank Rate to a low of 3 per cent by its March 2027 meeting, down from 3.75 per cent after Thursday’s interest rate decision, a survey showed on Friday.

Policymakers on the Monetary Policy Committee voted 5-4 to keep borrowing costs at 3.75 per cent but signalled further cuts ahead if an expected fall in inflation looks like it will last.

Financial markets are almost fully pricing in two more quarter-point rate cuts in 2026 following that decision, according to LSEG data, but do not see rates falling to 3 per cent.

The BoE conducted its quarterly Market Participants Survey from January 21-23 and received responses from 92 people.

The survey showed expectations for BoE quantitative tightening in the 12 months from October were unchanged at a median 50 billion pounds ($68 billion), the same as when the survey was last published by the central bank in November.

The Market Participants Survey also showed the median expectation for 10-year gilt yields was for them to finish 2026 at 4.25 per cent, compared with 4 per cent in the last survey.