Market implications of the BoE’s shifting rate-cut trajectory

With inflation unexpectedly rising to 3% in January, expectations around UK interest rates have shifted significantly. While the Bank of England is widely expected to hold rates at 4.5% in March, the outlook for 2025 remains uncertain. Market pricing suggests a growing likelihood of cuts in May and August, but persistently high inflation, sluggish GDP growth, and global geopolitical tensions could alter the trajectory. The Bank faces competing pressures—lower rates could support economic growth, yet premature easing risks fuelling inflation. Meanwhile, bond and equity markets remain sensitive...