Market participants now expect Bank Rate to stand at 4.25% a year ahead, against 3.75% in September, the Bank of England said on Friday in its latest Market Participants Survey.
The 80 respondents answered between 21 and 23 October, before the Monetary Policy Committee (MPC) met on 5 November. The results are a measure of market expectations, not a Bank forecast.
The median expectation for Bank Rate after the 5 November meeting was 4.00%, up from the 3.75% median in the September survey, which had 92 respondents.
Respondents put the mean probability of 4.00% after that meeting at 86.0%. In September they had put it at 35.0%, with 60.4% on a hold at 3.75%.
The median path then holds at 4.00% after the 17 December meeting and reaches 4.25% after the 4 February 2027 meeting. The mean probability of 4.25% in December is 19.5%, against 71.9% for 4.00%.
The median estimate of the neutral rate, the level at which policy is neither expansionary nor contractionary, rose to 3.50% from 3.25%.
Of the 77 who answered, 42 said the risks around that estimate were skewed to the upside, 32 saw them as broadly balanced and four saw a downside skew. In September, 44 of 89 had chosen the upside.
The median two-year-ahead rate is 3.50%, against 3.25% in September.
Respondents gave energy and related commodity prices a mean weight of 30.3% in shaping their near-term view, up from 25.9% in September. It remained the largest factor.
The most common assumption for Brent crude six months ahead was $85 to $99 a barrel, chosen by 46 respondents. A further 20 chose $100 to $114.
On second-round effects, where higher energy costs feed into wages and prices, 52 respondents assumed moderate additional effects. Nine assumed stronger and more persistent ones.
The median one-year-ahead forecast for CPI inflation is 3.0%, against 2.5% in September. The median for the fourth quarter of 2026 is 3.8%, against 3.3% before.
The median forecast for 2026 GDP growth is 1.4%, up from 1.1%.
Thirty-eight respondents described the policy stance as somewhat restrictive.
The median expectation for the 10-year gilt yield at end-December is 5.25%. Median gilt issuance is £250bn for 2026-27 and £290bn for 2027-28.
At its September meeting, ending on 16 September, the MPC voted 6-3 to hold Bank Rate at 3.75%. Three members, Megan Greene, Catherine Mann and Huw Pill, voted for a rise to 4%, according to the minutes. CPI inflation had risen to 3.1% in August.
The minutes said nearly all respondents to the September survey had expected no change at that meeting. Governor Andrew Bailey said that if the Middle East conflict persisted and the risk of second-round effects rose, “it is likely that policy may have to tighten”.
The Bank describes the survey as formulated by its staff and says its questions “never presume any particular policy action”. The next MPC decision is on 17 December.
