The Bank of England’s (BoE) next meeting to determine interest rates is on Thursday 30 April and all eyes will be on the Monetary Policy Committee (MPC) and its members’ response to the war on Iran.
The base rate – sitting 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?
Will interest rates be cut?
Rates were cut just before Christmas to the lowest point in almost three years and more was expected to come across 2026.
In fact, up until mid-February there was a strong chance of a rate cut in March or April, with an expected second cut later in the summer. But everything changed with the Iran war which has sent oil prices soaring, raising energy costs and with inflation likely to rise once more.
While rates were near-zero for a long time after the financial crisis, most analysts and economists now expect the “neutral rate” – how low the bank will cut to 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.
However, events in the Middle East have thrown those expectations into disarray and there is now real uncertainty which way rates will go in the nearer term. Analysts just about expect the rate to be held at 3.75 per cent for this vote, though some have argued for raising rates earlier this time to head off worse inflation down the line.
Influential factors
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.
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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.
UK outlook
As well as the domestic situation of higher-for-longer inflation, there has been rising unemployment across the UK, despite a minor drop last month. Very slow economic growth is another factor to weigh up.
But the big economic impact of the war in Iran is the surging price in oil and gas, which when sending energy bills higher adds to a return of high inflation.
Suren Thiru, ICAEW chief economist, said: “While the economic aftereffects of the Iran war have turned the Monetary Policy Committee notably more hawkish, a policy hold at 3.75% looks locked in given still heightened uncertainty over the ramifications of the conflict.
“Stagflation fears will cast a long shadow over this policy meeting with elevated concerns over inflation possibly pushing at least one of the more hawkish rate-setters to break ranks and vote to raise rates.
“With the Bank’s updated forecasts set to further fuel stagflation fears by projecting notably higher inflation and weaker economic growth, setting policy is likely to become more hazardous for committee members, especially given rising global headwinds.
“The squeeze on demand in the economy from weakening wage growth and a slowing economy should give policymakers sufficient wriggle room to keep rates on hold through this period of elevated inflation.”
Harriet Guevara, chief savings officer at Nottingham Building Society, added: “A hold at 3.75% this week now feels very likely, but the bigger story is how much the outlook has shifted. Just a few months ago, markets were pricing in further cuts. Now, with the conflict in the Middle East driving energy prices higher and inflation expectations rising, markets are pricing that rates are more likely to go up than down.
“For savers, that’s a meaningful change. Savings rates are already competitive, and if the base rate does rise further, there could be even more to come. On the mortgage side, the prospect of rate rises rather than cuts makes this an important time for borrowers to take stock. Anyone coming to the end of a fixed deal in the next six to twelve months should speak to a qualified mortgage broker who can assess their options and help them make the right decision for their circumstances. The market is moving, and professional advice is the best way to make sure you’re not caught out.
“Whatever happens with the base rate over the coming months, the people who tend to come out ahead – whether saving or borrowing – are the ones who act while conditions are in their favour, not the ones who wait and hope.”
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.
What about the rest of 2026?
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, and have now witnessed even across the past month in Iran.
Markets have wavered wildly recently between expecting only one cut this year and up to three rises occurring if the situation in the Middle East is prolonged.
Currently, the money markets are pricing in almost three hikes, though note that this is not always the same as economists actually expecting the Bank of England will follow suit.
The next MPC vote date is on 18 June.