The latest UK inflation figures have strengthened the case for a Bank of England interest rate cut, according to James Green, Investment Director at global financial advisory firm deVere Group.
The Office for National Statistics reported that consumer price inflation fell sharply to 3.0% in January, its lowest annual reading since March 2025 and down from 3.4% in December.
The decline was driven by lower transport, food, and energy costs, with core and services inflation also showing signs of softening.
“This is meaningful disinflation across both headline and underlying components,” Green said. “The data now give the Bank of England real latitude to act, and no credible reason to delay.”
The Bank’s Monetary Policy Committee is scheduled to meet on Thursday 19 March 2026 to assess incoming data and decide whether to reduce the base rate from its current 3.75%. Markets are already pricing in a quarter-point cut, with the possibility of further easing later in the year if disinflation continues.
Green highlighted the potential consequences of a rate cut across the economy:
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Households and Borrowers: Lower rates would reduce borrowing costs, improving mortgage affordability and supporting housing transactions.
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Financial Services: Banks could see higher lending volumes, better credit quality, and growth in consumer and SME financing.
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Consumption and Retail: Improved credit conditions and easing cost-of-living pressures would encourage discretionary spending, benefiting retailers, leisure, and travel sectors.
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Investments: Reduced policy rates would lift valuations for growth-oriented equities and real assets, particularly in technology and infrastructure sectors.
“The Bank has already cut rates six times since mid-2024 as inflation fell from double-digit peaks toward target,” Green said. “But monetary policy operates with a lag. Holding rates too high now risks choking growth just as price pressures loosen — that would be bad policy and worse economics.”
He added: “This is about acknowledging a structural change in inflation dynamics. The Bank’s remit is to balance stability with growth, and the latest data give them the facts to act decisively.”
Green concluded: “If the Bank of England wants to maintain credibility with markets and businesses, it must act in March. Beyond that, additional cuts this year would further stabilise the economy and reinforce confidence. Investors should begin positioning now – waiting until the decision day means being too late.”
