MNI BOE WATCH: Seen On Hold In Feb, Eyes On Pay Survey

The Bank of England is widely expected to leave Bank Rate on hold at 3.75% on Feb 5, with attention on forward guidance and its 2026 pay survey.

Analysts anticipate a seven-two or six-three vote for a hold, after two consecutive five-four votes. Divisions within the Monetary Policy Committee have already been highlighted by a change in the statement format to include separate paragraphs written by each individual member.

The MPC cut the policy rate to 3.75% in December and said that "Bank Rate is likely to continue on a gradual downward path.”

The Bank will also release its agents' 2026 pay survey, which look likely to steer the decisions of some MPC members going forward, with Deputy Governor Dave Ramsden highlighting its importance in the summary of his views at the December meeting.

The 2025 survey showed firms anticipated 3.5% pay growth, and the committee has been divided over whether this year’s results will be similar. In January, Megan Greene said such a level is not consistent with the inflation target, and that she would look “for a signal on the evolution of wage growth in the full Agents’ pay settlement survey” in the upcoming meeting.

In contrast, Swati Dhingra, who has consistently voted for greater policy easing, said she expected a weak labour market to restrain pay growth. Governor Andrew Bailey has said wage growth indicators are “hard to square” with rising unemployment. (See MNI INTERVIEW: UK Fiscal Framework Stifles Growth - Benigno)

LABOUR MARKET STOCK TAKE

The Bank will release its annual labour market stock-take in February and is likely to reconsider the vexed question of productivity growth.

Its inflation forecasts could have added significance this time around, as the MPC is expected to lower its CPI forecast for Q2 from 2.9% to something closer to 2%, in part because of measures in the Nov 26 budget. If the BOE forecasts CPI to be at, or very close to, the 2% target from April, more hawkish arguments around the risks of elevated inflation feeding through to wage and price setting will start to look frayed. 

Analysts largely expect the MPC's guidance to continue to include “Bank Rate is likely to continue on a gradual downward path. But judgements around further policy easing will become a closer call.”