𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

The Bank of England’s (BoE) next meeting to determine interest rates is on Thursday 19 February and all eyes will be on the Monetary Policy Committee (MPC) and its members’ response to the war on Iran.

The base rate – now at 3.75 per cent after being cut four times last year – impacts business, consumers and taxpayers through everything from mortgages to loans and savings, so what do experts foresee, both this week and beyond?

Will interest rates be cut?

Rates were cut just before Christmas to the lowest point in almost three years and more was expected to come across 2026.

In fact, up until only a few weeks ago there was a strong chance of a rate cut in March or April, with an expected second cut later in the summer.

While rates were near-zero for a long time thereafter, now most analysts and economists expect the “neutral rate” – how low the bank will cut it and then leave it, where the economy continues to grow but inflation is suppressed – will be higher this time, perhaps 3 per cent.

That means only another three cuts might come in total during this cycle, and as we get closer to that rate, the cuts could be spaced out further.

However, events in the Middle East have thrown those expectations into disarray and there is now real uncertainty which way rates will go.

Interest rate decisions take into account multiple factors over long periods of time, as well as expectations about what lies ahead – and 2026 again looks tricky in both regards.

As well as the domestic situation of higher-for-longer inflation, there is rising unemployment across the UK.

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But the big economic impact of the war in Iran is the surging price in oil and gas, which when sending energy bills higher poses a real risk to a return of high inflation.

That means the Bank of England are almost certainly set to hold rates in March as they see how the situation unfolds, with the prospect of having to raise them in future a distinct possibility.

“Just a few weeks ago today’s jobs figures would have been seen as the final green light for the Bank of England to cut interest rates once again in a bid to inject some adrenaline into the sluggish economy. Inflation was heading back towards the Bank’s 2% target, and with wage growth at a five-year low, rate setters would have found little to hold them back,” explained AJ Bell’s Danni Hewson, head of financial analysis.

“But that was then and today MPC members will have to consider how the war in Iran will impact prices. Markets will be watching the vote split closely for an indication of where rates may move next, depending on how long the conflict lasts.”

“The spectre of stagflation is hovering, with the combination of rising prices and stagnating growth posing a real threat,” added Susannah Streeter, chief investment strategist at Wealth Club. “High energy costs are set to dampen consumer spending and curb business investment as both grapple with elevated bills and ongoing uncertainty.”

Elsewhere, it’s worth remembering that with mortgages in particular, many products are priced using future expectations of the interest rate (swap rates), so changes in that market can already be accounted for.

For savers, though, whether or not an immediate cut to variable rates is coming, it’s always worth checking the best offers on the market to make sure your money is earning as much as it can for you.

Influential factors

The MPC has nine members, and their votes decide whether the base rate is cut, raised, or kept the same.

Among the elements MPC members will have been looking at are job and wages data, the level of inflation across the UK, and economic growth.

Higher inflation is a reason to keep interest rates up, as it can discourage businesses from investing in new projects or hiring – things that in turn raise earnings and spending power. Conversely, fewer jobs and lower wages means less spending power and lower demand, which helps to stem further price rises.

Recent key data has shown salary growth slowing and unemployment rising throughout the year. These are factors that can see interest rates decrease, while there are also external factors that can affect the UK, which the government and Bank of England can have little or no control over.

What about the rest of 2026?

The further into the future we look, the more murky the picture is – and it can change rapidly anyway as we saw last year with tariffs, Budget uncertainty, oil shocks and more, and have now witnessed even across the past month in Iran.

Sanjay Raja, Deutsche Bank’s chief UK economist, earlier explained that “with the economy now on a firmer footing than expected the impetus to accelerate rate cuts is likely lower,” – in other words, there’s less pressure on the BoE to cut rates to support businesses.

Markets have wavered recently between expecting only one cut this year and even a rise occurring if the situation in the Middle East is prolonged.

The next MPC vote date is on 30 April.