Having reduced the Bank Rate from 4.75% to 4.5% at its February meeting, the Bank of England Monetary Policy Committee (MPC) voted to maintain Bank Rate at 4.5% at its latest meeting on 20 March 2025. Further cuts to thebase rate are likely this year, with latest consensus forecasts implying the most likely outcome is a base rate reduction of 50 to 75 basis points by Q4 2025.
Although the rate of inflationfell inFebruary, this is likely to prove temporary, with Consumerprice inflation (CPI) forecast torise further above target in the coming months (and a probable peak of around 3.7% in Q3). The numbers remaine levated compared to the headline 2.0% target rate.
Gilt yields remain volatile against a background of rapidly evolving global concerns. 10 years gilt yield are now at 4.7%, down from a January peak close to 5%, but markedly higher than the circa 4% seen at this time last year. The five-yearswapratehasdippedbackbelow4%, in line with its level 12 months ago. This indicates market confidence that the path of base rate remains firmly downwards.
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