Mean about the mode: UK: Rates Strategy

Research evidence excerpt

Mean about the mode: UK: Rates Strategy

FICC Research

Interest Rates

18 June 2026

UK: Rates Strategy

Mean about the mode

Governor Bailey's comment on market pricing reopens the

possibility that the MPC might face a "Maradona moment"

later this summer. Pricing for 2027 is vulnerable to 2026's Moyeen Islam +44 (0) 20 7773 4675

current 30bp of tightening being pushed back to retain some moyeen.islam@barclays.com

tightness in financial conditions Barclays, UK

At its June meeting, the MPC voted 7-2 to leave the policy rate unchanged at 3.75%. The two

dissenters were BOE Chief Economist Huw Pill and external member Megan Greene, both of

whom voted for a 25bp increase. This was largely in line with expectations of some dissent from

the two most prominent hawks. For the majority of the committee, upside risk to inflation had

lessened given the end of the Middle East conflict. The two dissenters remained concerned

about how well entrenched the underlying disinflationary process was in the economy ahead of

the outbreak of the conflict and by extension, saw continued risk of second-round effects from

households and businesses due to the energy price shock. The Bank staff see underlying

quarterly growth at 0.2% q/q for both Q1 26 and Q2 26. The drop in energy prices has moved the

staff's assessment of inflation to around 3% in Q3 26 and around 3.25% in Q4 26. This is slightly

below the Bank's Scenario A projection published in the April MPR and well below its more

pessimistic scenarios (Figure 1). The decline in energy prices offers the committee the

unexpected gift of more time to consider the impact of Q2's events on inflation. If we had still

been in a world of elevated energy prices, the committee would have likely been under much

more pressure to deliver a pre-emptive hike.