ING expects the Bank of England to hold rates steady throughout 2026, as inflation close to 3% remains within the tolerable range.

(1) ING economists pointed out that the Bank of England's latest forecast expects inflation to approach 3% “from the second half of this year to early next year,” but this level remains within the central bank’s tolerable range. Therefore, the baseline expectation is “the Bank of England will keep interest rates unchanged throughout 2026,” and policy easing will be postponed until the next cycle. (2) ING stated that its current forecast predicts two rounds of rate cuts starting from spring 2027 but emphasized that this path “depends on there being no substantial fiscal stimulus in the autumn budget.” If fiscal expansion exceeds expectations, the timing of rate cuts may be further delayed. (3) The British pound has been under pressure recently, as investors are cautious about the funding sources for the new Prime Minister Burnham’s spending commitments (including measures such as caps on transport fares and electricity bills). This has triggered concerns in the market over further strain on public finances—an issue that is particularly sensitive in the UK following the 2022 “Truss fiscal turmoil.”