Latest UK inflation numbers underscore the Bank of England has little excuse not to cut interest rates in March, and investors should start preparing now for this, affirms the Investment Director of global financial advisory giant deVere Group.
The comments from James Green come as the Office for National Statistics reported UK consumer inflation eased sharply to 3.0% in January, its lowest annual reading since March 2025, and well below December’s 3.4%.
Headline price pressures have clearly lost momentum, supported by lower transport, food and energy costs, while core and services inflation have also softened.
James Green states: “This is meaningful disinflation across both headline and underlying components. The data now give the Bank of England real latitude to act, and no credible reason to delay.”
The next scheduled Bank rate decision by the Bank of England’s Monetary Policy Committee is on Thursday 19 March 2026, when policymakers will assess incoming data before deciding whether to trim the official base rate from its current 3.75% level.
Green continues: “The Bank has already reduced rates six times since mid-2024 as inflation fell from double-digit peaks toward target. Yet the rate path should not just be reactive; it should reflect incoming evidence. January’s inflation report, combined with weakening employment and wage dynamics, gives the MPC the facts it needs to cut when it next meets.”
Markets and economists are strongly pricing in a quarter-point rate cut in March, with expectations of further easing later in the year should disinflation prove persistent.
Green says: “Monetary policy operates with a lag. The cumulative impact of past tightening is already discouraging demand. Holding rates too high now risks choking growth just as price pressures loosen — that would be bad policy and worse economics.”
He explains the consequences for key sectors if the Bank does act: “Financial markets will respond swiftly. Lower rates will ease borrowing costs for households and corporates, boosting sentiment. UK housebuilders in particular are poised to benefit. Mortgage affordability improves even with modest cuts, supporting housing transactions and new build activity.”
Financial services more broadly also stand to gain, he adds: “Banks with diversified revenue streams can benefit from greater lending opportunities as demand rebounds. Consumer credit and SME financing become more attractive, and credit quality improves as financial stress eases.”
Green highlights the ancillary effect on consumption: “When cost-of-living pressures ease and credit conditions improve in tandem, discretionary spending follows. Retailers, leisure and travel businesses are all positioned for a pick-up in activity if monetary policy supports demand.”
He also points to asset valuation effects: “Lower policy rates reduce discount rates on future earnings. That tends to lift valuations in growth-oriented equities and real assets, particularly in technology and infrastructure sectors that had been priced on ultra-tight financial conditions.”
Green emphasises that a rate cut is not merely routine: “This is about acknowledging a structural change in inflation dynamics. When prices are coming off and slack is building in labour markets, the Bank’s remit is to balance stability with growth. The latest data do exactly that.”
He concludes: “If the Bank of England wants to maintain credibility with markets and businesses, it must act in March.
“Beyond that, additional cuts this year would further stabilise the economy and reinforce confidence. Investors should begin positioning now – waiting until the decision day means being too late.”