United Kingdom’s interest rate at the end of 2026
💡 What the odds say
Most likely: Greater than 3.75% at about a 28% chance.
The field is highly concentrated among three scenarios (3.25%, 3.50%, 3.75%) with 83% combined probability, reflecting expectations of only modest cuts from the current 3.75% rate, but the single biggest recent shift was the Bank of England's June 18 hold at 3.75%, which likely solidified 3.75% as a viable end-year outcome and dampened hopes for aggressive easing (CNBC, Jun 18).
What's driving it
- • The BoE held rates at 3.75% on June 18, citing stabilized inflation and cautious outlook amid Iran war peace prospects, which reinforced the 3.75% scenario's plausibility (CNBC, Jun 18; Forbes, Jun 18).
- • Inflation stabilizing in May reduces the urgency for further hikes but leaves room for cuts only if the economy weakens or peace deal materializes (The Independent, Jun 18).
- • The ongoing Iran war peace negotiations introduce geopolitical uncertainty, influencing rate expectations – a deal could reduce energy prices and pave the way for cuts (CNBC, Jun 18).
Why the front-runners lead
- • 3.25% and 3.50% lead because markets anticipate a gradual easing cycle starting later in 2026, driven by expectations that inflation will continue to moderate and that the BoE will cut at least once (The Independent, Jun 18).
- • The 3.75% scenario (current rate) retains a strong 27% share as the BoE's cautious stance leaves open the possibility of no further moves if economic data remains mixed (Forbes, Jun 18).
- • The concentration of probability in the 3.25%-3.75% range reflects a consensus that rates will end the year near current levels, not far above or below – the 3.0% or less and >3.75% options are both below 12% combined.
Why it's still open
- • The field is open because 3.75% is still a 27% possibility – if inflation proves stickier or geopolitics deteriorate, the BoE could hold steady, keeping rates at 3.75% (MoneyWeek, Jun 18 suggests rate cuts are debated).
- • A surprise spike in inflation or a geopolitical crisis (e.g., escalation of the Iran war) could force the BoE to hold or even raise, pushing the >3.75% scenario above its current 5% (CNBC, Jun 18).
- • Alternatively, a rapid peace deal and slowing economy could prompt faster cuts, making 3.0% or less (currently 12%) a more serious contender, especially if forward guidance shifts dovishly (The Independent, Jun 18).
What to watch
- • Next MPC meeting (August 2026): a cut would boost 3.50% and 3.25%, while a hold would lift 3.75% and >3.75% (no headline yet, but schedule known).
- • UK GDP or inflation data releases in coming months: weaker data would increase odds of cuts, stronger data would reduce them (The House of Commons Library, Jun 18).
- • Resolution or breakdown of Iran war peace talks: a deal would likely lower energy prices and open the door for rate cuts (dovish for front-runners), while failure could keep rates higher (CNBC, Jun 18).
AI-generated · grounded in recent news + odds · informational only, not advice. Verify on the source platform.
Data from Futuur’s public API, for informational purposes only. PredictPal is not affiliated with any platform and does not facilitate trading.
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