Resolution criteria

The market resolves based on the official Bank of England Bank Rate (base rate) announced on or around January 1, 2027. Resolution will be determined by the most recent MPC decision prior to or on that date, as published on the Bank of England's official Bank Rate database. The rate will be rounded to the nearest 0.25% (in 25 basis point increments, which is the standard MPC adjustment unit).

Background

The Bank of England held the base rate at 3.75% on February 5, 2026. The MPC has cut rates six times since August 2024, and if the economy and inflation outlook evolve as expected, there should be scope for some further cuts to Bank Rate in 2026. The Bank projects CPI inflation to fall to 2.0% in June 2026 and stay around 2% thereafter.

Market forecasts for January 2027 vary. One forecast predicts the base rate will fall to 3.38% by January 2027, while another suggests a most likely rate of 2.75% with a possible range of 2.50% to 3.00%. Fitch predicts the policy rate at 3% in 2027.

Considerations

The MPC's path forward depends heavily on inflation dynamics and labor market conditions. The unemployment rate has hit 5.2%, the highest level since January 2021, which typically supports rate cuts. However, the February 2026 vote was narrow at 5-4 to hold rates, indicating internal disagreement about the pace of easing. The Bank cannot say precisely when or by how much rates will be cut, as that depends on how things evolve.

This description was generated by AI.