Bank rate cut more likely?

Hopefully the MPC WhatsApp group was popping off this morning. Growth data was pathetic, 0.1% provides very little confidence in the UK economy. This does play into the hands of the Dovish voters, such low growth means that borrowers are still penny pinching and it’s Andrew Bailey and his team with the power to provide respite.

Nearly no growth in the UK economy and core inflation on track to fall off a cliff means the central bank now has to cut rates at the next meeting. With more data on the economy to be revealed before the meeting it should be considered they go further and faster and start with a 0.5% cut now that there’s evidence of the spiral of stagnation we are in.

This data piles more pressure on the MPC ahead of the March 19th meeting. The February vote was already a knife-edge 5 - 4 to hold at 3.75%, and that was before today's figures landed. With growth flatlining and construction in freefall, the hawks are running out of arguments. A March cut to 3.5% now looks more likely than not. Markets are already pricing in further easing across 2026 and today's data only accelerates that thinking. As for the pound, sterling was already under pressure this morning ahead of the data, weighed down by BoE dovishness and domestic political uncertainty. Weak GDP won't help. Expect the currency to drift lower as rate cut expectations firm up. For mortgage holders, this is significant. Swap rates will be watching closely, and any downward movement could feed through to fixed rate pricing sooner than many expect.

The Bank of England has already hinted at rate cuts if inflation gets back to, or around, target and this shambolic economic data could see the chances of a rate cut at the next meeting massively increased. The economy is on its knees and it needs stimulus urgently. Though the health of the economy is bleak, borrowers could potentially benefit next month as the Bank of England seeks to get the economy firing again.

For the more hawkish members, weak growth alone is rarely enough. Their focus is still inflation and wage pressures. If price growth remains sticky, they will argue that cutting too soon risks undoing hard won progress. But this kind of anaemic data does shift the tone. It strengthens the case for those already leaning toward a 0.25% cut and makes it harder to justify holding rates purely on growth optimism. So yes, it could tip one or two toward a reduction, especially if upcoming inflation or labour market data also softens.

A cut is needed but whether it will happen and further feed the beast is the question. Something needs to happen to push the economy on but I fear the damage is done and a plaster just won’t cover it this time.

I don't see the MPC changing course on whatever strategy they are currently adopting. With inflation stubbornly high, it is harder to justify further reductions just yet, as this small increase in GDP adds to the growing evidence that the country is heading for an eventual meltdown.