False Comfort in SONIA

Why the BoE narrative is wrong.

Thursday sees the Bank of England (BoE) convene for the first time in 2026. The message from the December meeting was one of a central bank nearing the end of its easing cycle. Indeed, Governor Bailey said, “With each reduction, the question of the extent of future cuts becomes more delicate.”

His comments, with other factors such as the 5-4 vote split and more, have lulled rate markets into a false sense of security. Pricing in 38bps worth of cuts for 2026 might be following the narrative, but we believe the narrative is wrong.

There are several factors that could emerge in the coming months, leading the BoE to cut well in excess of 38bps this year. As such, trade ideas become apparent.