An ING economist said recent UK GDP strength may be overstated and that growth may slow into the summer. Inflation is expected to rise towards 4% beyond July while private sector wage growth is closer to 3%, which would reduce real wages.<\/p>\n
Higher energy prices are expected to add to recent increases in unemployment. Weaker corporate pricing power is also described as a drag on the economy.<\/p>\n
ING expects the Bank of England to keep Bank Rate unchanged at 3.75% throughout 2026. The decision is described as a close call, including ahead of the June meeting.<\/p>\n
The article notes it was created with the help of an artificial intelligence tool and reviewed by an editor.<\/p>\n
We believe the market is mispricing the probability of a Bank of England rate hike in the coming months. The underlying economic picture is deteriorating despite some recent positive headlines. Traders should therefore position for a more dovish stance from the central bank than is currently expected.<\/p>\n
The latest data from early April supports this view of a slowdown, with the ONS reporting that CPI inflation has reached 3.9%, while average weekly earnings growth has slowed to just 3.1%. This confirms that real wages are falling, putting a significant strain on household budgets. With March retail sales figures also showing a 0.5% decline, the pressure on the consumer is becoming undeniable.<\/p>\n
This growing weakness is why we see the Bank of England holding rates at 3.75% through its June and subsequent meetings this year. Rising unemployment, which recently ticked up to 4.4%, and weakening corporate pricing power make a rate hike a significant policy risk. The Bank will not want to tighten monetary policy into a potential recession.<\/p>\n
For derivatives traders, this suggests buying December 2026 SONIA futures could be a prudent move. This position would profit as the market unwinds its expectations for a rate hike, aligning with our view of a steady Bank Rate. The current forward curve appears too aggressive given the challenging economic headwinds.<\/p>\n
We also see potential for Sterling to weaken, particularly against the US Dollar, as policy divergence grows. Buying GBP\/USD put options offers a way to position for a decline in the pound if the Bank of England’s inaction contrasts with a more hawkish Federal Reserve. This trade benefits from the UK’s weaker growth and inflation dynamic.<\/p>\n
This situation is reminiscent of the caution the Bank showed in late 2025 when it paused its cycle despite a temporary inflation scare. Looking back, that proved to be the correct decision as growth faltered. We expect a similar data-dependent and cautious approach this summer.<\/p>\n
The key risk to this strategy would be an unexpected acceleration in services inflation or a surprise jump in the next wage growth report. Traders should therefore monitor the upcoming May labour market data very closely. Any figure above 3.5% could cause the market to quickly re-price the odds of a summer hike.<\/p>\n","protected":false},"excerpt":{"rendered":"
ING warns UK growth may slow; inflation near 4%, real wages fall, and Bank Rate stays 3.75% through 2026.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-45155","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45155","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=45155"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45155\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=45155"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=45155"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=45155"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}