ING economist James Smith has stated that the recent strength in UK GDP is likely overstated and anticipates a slowdown in UK growth as inflation is expected to rise towards 4% beyond July, while real wages are projected to fall due to private sector wage growth being closer to 3% and potentially trending lower in the short term [1]. Smith points to rising energy prices and weaker corporate pricing power as significant headwinds for the UK economy, which are also likely to contribute to recent increases in unemployment [1].
Given these factors, ING remains unconvinced that the Bank of England will hike rates this year, describing the decision as a close call, especially if economic disruption persists by the time of the June meeting [1]. ING projects that the Bank Rate will remain unchanged at 3.75% throughout 2026 [1].
No specific market reactions or analyst opinions beyond ING's outlook are mentioned in the article. The analysis underscores the expectation of a prolonged period of steady rates due to persistent economic challenges, including inflationary pressures and weakening real wages [1].
CONCLUSION
ING forecasts that the Bank of England will keep rates steady at 3.75% through 2026, citing slowing growth, rising inflation, and falling real wages as key factors. The outlook suggests continued economic headwinds for the UK, with no rate hikes anticipated in the near term.