Will interest rates go down this week? Bank of England’s key factors and 2026 predictions

The Bank of England’s (BoE) next meeting to determine interest rates is on Thursday 5 February and all eyes will be on the Monetary Policy Committee (MPC) and whether its members opt to continue lowering rates.

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?

Rates were cut just before Christmas to the lowest point in almost three years, but back-to-back cuts are another matter.

We haven’t seen that from the BoE since the post-financial crisis days of 2008, when the bank rate fell from 5 per cent to 0.5 per cent in the space of around five months.

There’s also the fact that 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.

Given that we’ve just had a cut, that inflation data two weeks ago showed an unexpected spike and the fact we still have higher wage growth than the BoE would ideally like, it’s very unlikely we’ll see another cut now in February.

But 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, we’ve still got Donald Trump threatening actions on nation - either military or economical - plus commodities such as gold and silver being more volatile than normal and wider political uncertainty domestically.

“Growth picked up in November, and surveys suggest a strong start to the year, which will be enough to keep the MPC on hold despite a continued loosening in the labour market,” said RSM UK’s chief economist Thomas Pugh. “The guidance will probably continue to indicate more cuts are likely but will be increasingly cautious on the timing and number of additional rate cuts needed.”

Barclays, meanwhile, double down on a “cautious tone” from the meeting and while agreeing a hold vote will be the outcome, suggest a widening split of 7-2 from the nine votes.

“Given that data have developed broadly in line with the MPC's forecasts, and communication in December expressed an inclination to slow the cadence of cuts as Bank Rate approaches neutral, we believe the majority of MPC members will favour a hold,” read a note from analyst Jack Meaning.

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.

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.

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.

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.

“Further ahead, the MPC will be more cautious about future rate cuts as they approach neutral, we expect just one cut this year in April,” added RMS’s Pugh. “That said, if the labour market continues to weaken, and that weakness translates into a faster-than-expected slowdown in pay growth then the MPC could be convinced to cut further.”

Markets are split for now, pricing in one or two cuts this year.

The next MPC vote dates will be on 19 March and 30 April.