Bank of England likely to keep rates on hold as markets ramp up hike bets in World Economy News 25/04/2026 Markets are pricing two rate hikes this year The Bank of England is poised to keep rates on hold at its April meeting. But will it push back against market expectations of two rate hikes by year-end? The Bank was evidently caught off guard by the reaction to its March decision, which saw even the most dovish officials appear open-minded about hiking rates. Governor Andrew Bailey told Reuters in the days after that investors were “getting ahead of themselves”. We doubt his views have changed since then, but we suspect the Bank will be reluctant to push back too hard on market expectations at Thursday’s meeting. For one thing, market pricing is not quite as extreme as it was towards the end of March. That’s mostly because oil prices have come lower; the correlation between energy costs and short-dated swap rates has been fairly tight since the crisis began. More importantly, though, nobody, least of all the Bank, knows how the crisis will develop between now and June. Energy prices are unpredictable, but the BoE is also acutely aware that the longer the Strait of Hormuz disruption endures, the more likely the unforeseen knock-on effects on supply chains. That said, the fact that natural gas prices have stayed remarkably contained – and have even flirted with pre-war levels in recent days – is a significant source of near-term comfort. Natural gas – and the role it plays in setting electricity prices and heating bills – is in many ways a bigger vulnerability for the UK than oil. The other challenge the Bank has is that the data received since the March meeting hasn’t really told it much about how the economy is responding to the war. Inflation is up, but so far only on the predictable rises in motor fuel and heating oil costs. Consumer inflation expectations have also predictably surged. But measures of corporate price behaviour are more mixed. The PMIs pointed to rising output price pressure. But the Bank’s own survey of companies – the Decision Maker Panel – didn’t point to an unduly large pick up in inflation expectations. Unsurprisingly, most respondents said the war would lead them to raise prices, but crucially, wage growth expectations – the real driver of longer-term inflation persistence – are unchanged since the crisis began. In short, it will take time to get a decent sense of whether firms are able to pass on higher energy costs to their consumers. And the Bank will want sight of the April CPI data, which will be released in May. That will give us a sense of how aggressive (or not) price hikes were at the start of the financial year. Given that large swathes of prices in the service sector are only updated once per year, this is fairly consequential for the inflation profile over the next 12 months. Expect an 8-1 decision in favour of “no change” If the data has told us anything in recent weeks, it is that the economy is in a very different place from 2022 when the last energy crisis broke out. Employment is still falling across the consumer services industries and private sector wage growth has fallen – and crucially is now at a level the Bank told us in February was consistent with achieving the inflation target over the medium-term. That’s why, after last month’s surprising show of unity, we expect the old divisions among committee members to come back to the fore. Though the framing has naturally shifted from “cut or h