THE Bank of England (BoE) will not cut the base rate this week because it “simply cannot risk easing while inflation may heat up again”, experts have predicted.
The BoE’s current base rate is 3.75% – and it will make its decision on whether to adjust it on Thursday.
It’s at its lowest level in nearly three years.
All eyes will be on the Monetary Policy Committee (MPC) and whether its members opt to continue lowering rates.
Inflation rose in the 12 months to December 2025, up to 3.4% – the first time it has risen since July 2025.
The Bank expects inflation to near 2% by the middle of next year.
Mark O’Connor, Mortgage Advisor at Online Mortgage Advisor, said he isn’t expecting the base rate to be cut.
He added: “Personally I am not expecting the Bank of England to cut rates this time around. Whilst the recent rate cuts have been most welcome to borrowers, I do feel that they will leave rates on hold to keep a ‘lid’ on inflation. The unexpected rise in inflation in December will lead to the ‘hold’ decision.
“In the mortgage world we have recently seen some lenders increase fixed rates slightly too, which was a little surprising and unexpected.”
Spooked by sticky inflation
Darryl Dhoffer, Founder at Bedford-based The Mortgage Geezer, said Governor Andrew Bailey will be cautious.
He continued: “The Bank of England is all but certain to hold interest rates at 3.75% this Thursday following a nasty inflation surprise. December’s CPI rose to 3.4%, up from 3.2%, defying forecasts and moving firmly away from the 2% target. Policymakers are spooked by sticky service inflation and robust public sector wage growth, which signal that underlying price pressures are not yet tamed.
“Governor Andrew Bailey has warned that future cuts are a ‘closer call,’ signalling a pause. With the economy showing some resilience, the MPC can afford to wait. Markets have already priced in this hold, pushing hopes for the next cut to April. The Bank simply cannot risk easing while inflation may heat up again.”
Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, said he also expects a hold.
He added: “The BoE will deliver its first policy announcement of the year on Thursday. After the narrowest of votes to cut the Bank Rate by 0.25% to 3.75% in December, I expect a clear majority of the MPC to vote for holding at 3.75%, but not unanimity.
“The ’right’ move depends on which economic risk you fear more. A hold preserves credibility against 3% wage growth but risks over-tightening as sluggish GDP and falling inflation raise real rates. However, delaying a cut could deepen the current economic drag.”
They are terrified of inflation
Michelle Lawson, Director at Fareham-based Lawson Financial, said a hold is the most likely move.
She continued: “Not much love from Threadneedle Street in Valentine’s month as I think there will be a hold this time around and a spring forward in March with a cut then.
“This all depends on the greater figures as we know but the markets currently seem stable but inflation remains a little burdensome giving rise to caution.
Kundan Bhaduri, Entrepreneur at London-based The Kushman Group, said the BoE is “terrified” of inflation.
He added: “If you are waiting for Andrew Bailey to play the hero, prepare to be disappointed. The Bank of England is likely to hold rates, or at best offer a token cut that barely touches the sides, because they are terrified of the very inflation that the government’s own public sector pay deals are fuelling.
“With unemployment ticking up and private sector wage growth stalling, the theoretical case for high rates has evaporated. But the Old Lady of Threadneedle Street is paralysed by ‘service inflation’ data that is six months out of date. They are fighting the last war while the high street continues to burn.”
Photo by Samuel Isaacs on Unsplash.
