A member of the Bank of England’s Monetary Policy Committee (MPC) has indicated that up to three base rate cuts could take place in 2026, as inflation continues to ease and the labour market softens.
Alan Taylor, an external MPC member, suggested that the UK is moving steadily towards “inflation normalisation”, giving policymakers greater confidence that further reductions may be appropriate.
Recent figures show CPI inflation easing to 3% in January, down from 3.4% in December, helped by lower fuel costs, reduced food prices and cheaper airfares. While inflation remains above the Bank’s 2% target, the direction of travel is encouraging.
Taylor noted that services inflation – closely linked to wages and domestic demand – remains under close review. He also highlighted global economic risks, particularly changes in US trade policy, which could influence longer-term economic conditions.
If three cuts were implemented this year, the base rate could potentially fall to around 3.0% by year end – a scenario that would likely improve mortgage affordability and further support property market activity.
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