-
We expect the Bank of England (BoE) to keep the Bank Rate unchanged at 4.50% on Thursday 20 March in line with consensus and market pricing.
-
Data has been mixed and amid elevated uncertainty, this warrants a continued signalling of only a gradual approach to monetary policy easing.
-
We expect the reaction in EUR/GBP to be rather muted with risks tilted to the topside.
We expect the Bank of England to keep the Bank Rate unchanged at 4.50% on Thursday 20 March in line with consensus and market pricing. We expect the vote split to be 6-3 with the majority voting for an unchanged decision and Dhingra, Taylor and Mann voting for a cut. Note, this meeting will not include updated projections nor a press conference following the release of the statement.
Overall, we expect the BoE to stick to its previous guidance noting that “a gradual and careful approach to removing monetary policy restraint remains appropriate”. We expect the MPC to highlight heightened uncertainty due to domestic fiscal policy initiatives and trade policy tensions. By extension, we expect them to be in no rush to alter the current guidance. Since the last monetary policy decision in February, data has been mixed. The economy continues to stagnate, the labour market is gradually loosening while price pressures continue to be elevated. The economy ended 2024 on a slightly stronger note than in the MPC’s projection, growing 0.1% q/q in Q4 2024. However, PMI data and monthly GDP estimate for January signals that growth remains muted, increasing the downside risks to the growth outlook. While private sector wage growth was slightly lower than expected at 6.2% in the three months to September (vs BoE forecast of 6.3%) it remains significantly elevated. On the inflation front, inflation was slightly higher than expected in headline terms but still showed broad based easing when looking at the service sector. The reaction to the impending increase in employers’ national insurance contribution from April remains a risk for the labour market.
BoE call. We expect the BoE to stick to quarterly cuts, leaving the Bank Rate at 3.75% by YE 2025, which is lower than markets are expecting. Markets are pricing around 55bp for the remainder of the year. However, we highlight that the risk is skewed towards a swifter cutting cycle in 2025, given the dovish bias within the MPC.
Market reaction. We expect the market reaction to be rather muted upon announcement with an unchanged decision fully expected by markets and the BoE aiming to keep its options fully open. More broadly, we expect EUR/GBP to move lower in the coming quarters driven by a relatively hawkish BoE, and a growth pickup in the UK relative to the euro area in 2025. The key risks are continued elevated uncertainty, more euro optimism and a more forceful policy easing stance from the BoE.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
Recommended Content
Editors’ Picks

AUD/USD faces the next hurdle at 0.6400
AUD/USD rose markedly and approached the key 0.6400 hurdle at the beginning of the week, always in response to rising weakness in the US Dollar and hopes of fresh stimulus in China.

EUR/USD keeps the upside target at 1.1000
EUR/USD extended further Friday’s recovery and traded at shouting distance from the YTD peaks near 1.0950 in response to increased selling pressure in the Greenback and the improved political scenario in Germany.

Gold consolidates around $3,000 ahead of Fed
Gold prices has started the week on a positive tone and maintains their trade around the key $3,000 mark per troy ounce on the back of the modest pullback in the Greenback and mixed US yields across the curve,

Crypto markets could gain $1 trillion as Gold price reaches $3,000: Tokenized-Gold expert explains
Tokenized-Gold assets hit a $1.8 billion market cap on Monday after the Gold (XAU) price marked new all-time highs above $3,000 per troy ounce. In an exclusive interview with FXStreet, RAAC CEO Kevin Rusher explains how tokenized Gold assets could impact the next crypto market recovery phase.

Five Fundamentals for the week: Fed leads central bank parade as uncertainty remains extreme Premium
Central bank bonanza – perhaps its is not as exciting as comments from the White House, but central banks still have sway. They have a chance to share insights about the impact of tariffs, especially when they come from the world's most powerful central bank, the Fed.

The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.