Swati Dhingra from the Bank of England confirmed her dovish stance, emphasising that gradual rate cuts will still keep monetary policy restrictive and impact the economy. She voted for a 50 basis point cut on 6 February alongside Catherine Mann.
Chief Economist Huw Pill is expected to address market rate expectations, which remain cautious despite Governor Andrew Bailey’s comments on inflation being temporary. Predictions suggest three more rate cuts this year due to a deteriorating fiscal situation, although EUR/GBP upside is seen as limited due to the euro’s own challenges.
Swati and Catherine’s push for a larger rate cut shows that some within the Bank of England believe monetary policy is still too restrictive, even with inflationary risks in the background. A 50 basis point reduction would have marked a bold shift, but the majority prefer smaller adjustments. That suggests traders betting on a sharp fall in rates may need to reset expectations.
Huw, as usual, will probably attempt to manage market hopes. Given that rate expectations have stayed controlled—despite Andrew hinting that inflation pressures could be short-lived—there’s little risk of a dramatic policy change just yet. Traders should expect more of the same from him: balancing inflation concerns with the need to avoid suffocating growth.
Predictions of three rate cuts this year highlight worsening fiscal conditions, meaning policymakers may not have the freedom to hold rates high for too long. However, those watching EUR/GBP should be aware that the euro is facing its own obstacles. Any upward moves in the pair will have limits, as economic struggles elsewhere in Europe prevent a one-sided trend.
In the coming weeks, positioning should focus on the likelihood of gradual adjustments rather than a policy shift that catches markets off guard. If rate cuts are coming, they seem unlikely to be rushed. The challenge now is in determining precisely when the first move comes, and whether external pressures force action sooner than policymakers would prefer.
