By Paul Hannon

Bank of England Governor Andrew Bailey Tuesday said it is possible that he will back another rate cut at the March meeting of policymakers.

Bailey has been the decisive voter on the Monetary Policy Committee over recent meetings, switching his vote to back a cut in December, and then again to secure a hold in February.

The other eight members of the MPC have split into two equally-sized camps consistently favoring either lower or steady borrowing costs.

"The question for me is have I seen enough further evidence to feel that I'm confident to take that step," Bailey told lawmakers in reference to the March 19 meeting. "It is a genuinely open question at the moment."

The U.K.'s annual rate of inflation picked up last year, but policymakers expect it to come in around their 2% target in April, largely due to cuts in home energy prices announced by the government in November.

However, rate setters have varying degrees of confidence about inflation staying at the target over coming years.

Also speaking to lawmakers, BOE Chief Economist Huw Pill said he is not convinced that inflation will settle at 2% if the key rate is cut to a level that no longer restrains economic activity. Those comments suggest he will continue to vote against a rate cut in March.

"Bearing down on those underlying inflationary pressures remains necessary," he said. "On balance, I see risks to the upside and that points in the direction of caution."

At the opposite end of the MPC spectrum, Alan Taylor made the case for further cuts to bring the key rate to a neutral level at which it is no longer damping activity.

But he said the cuts could take the key rate below 3% if the U.K. economy slides into recession.

"If we had really negative growth, we would have to go into accommodative territory," he said.

Investors increasingly expect the BOE to lower borrowing costs at its March meeting, and at least once more before the end of the year.

That marks a shift since the start of the year, when fewer and later moves were widely expected. Since then, official figures have pointed to a faster-than-expected rise in the unemployment rate, while the BOE has lowered its economic growth forecast for the year.

A key question for rate setters is whether workers trim their pay expectations as jobs become less secure, or continue to demand higher wage increases to compensate for several years of above-target inflation.

"We are seeing some softening in the labor market," said Bailey. "Is that going to get reflected through into expectations? How long will that take to feed through into wage bargaining."

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

February 24, 2026 10:25 ET (15:25 GMT)

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