City Bets on Bank of England Rate Cuts as UK Unemployment Soars

Published: 19 February 2026. The English Chronicle Desk. The English Chronicle Online

Financial markets in the United Kingdom are increasingly pricing in sharp interest rate cuts this year as the economy shows pronounced signs of weakening, with unemployment rising to its highest level in more than five years. Official data reveals that the jobless rate climbed to around 5.2 %, reflecting a softer labour market and slower wage growth — results that have bolstered investor expectations that the Bank of England (BoE) may begin easing monetary policy as early as its meeting in March.

In response to the weakening jobs picture, money markets have pushed up the probability of a rate reduction, with traders now betting on multiple quarter‑point cuts by the central bank before the end of the year in a bid to stimulate economic growth and support hiring. Government bond yields have fallen, the pound has weakened against major currencies, and key UK stock indices such as the FTSE 100 have climbed, as investors adjust their portfolios to anticipate easier monetary conditions ahead.

Economists say the unemployment increase — driven in part by slower hiring in service‑sector industries and broader economic uncertainty — may give the BoE more room to lower interest rates, even as inflation remains above its 2 % target. These expectations are strengthened by signs that core inflation pressures are easing, contributing to market bets that the BoE will act to reduce borrowing costs after a period of relative policy restraint.

While rate cut speculation is positive for financial markets in the short term, it also reflects deeper concerns about the UK economy’s momentum and the challenges facing households and businesses. Investors and analysts alike will be watching upcoming inflation figures and further labour market reports closely to judge how quickly the BoE might move to stimulate growth through lower rates.

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