The week ahead 02 March 2026 - Market interest rates continue to fall
What to watch out for in the UK economy and property market this week.
Last week saw the 10-year gilt yield, which is one of the benchmarks banks use when pricing new loans, decline further. On Friday afternoon, it stood at 4.25%, down from 4.52% a month ago and well below its 52-week high of 4.89%.
A number of factors are at work here. Firstly, disappointing labour market data for the UK is increasing pressure on the Bank of England to cut the Base Rate, and the financial markets are pricing this into gilt yields. At the press conference following the last rate setting meeting, the Bank’s Governor, Andrew Bailey, hinted that a reduction for interest rates was coming. Our current forecast is for two Base Rate cuts totaling 50 bps this year.
Second, perceptions of the state of the UK government’s finances have become more upbeat lately. Indeed, the Financial Times last week reported that forecasters in the City are predicting less government debt issuance in the next fiscal year. In part, this is due to higher taxation, which will leave households and firms with less money to spend, but has also reassured the financial markets that the government has its finances in order.
This strengthens our view that the UK is moving into a period of lower debt costs, coinciding with decelerating inflation. Both factors will provide a firm foundation for an economic recovery, which should benefit the property investment and leasing markets.
UK consumer confidence declined in February, with the GfK index falling to -19, down from -16 in January. GfK said households are concerned about job security. Also, the slowdown for wages growth is hitting consumer spending power. This further adds to the case for a Base Rate cut.
The main UK economic news story for this week will be the Chancellor’s Spring Statement, which happens tomorrow. Rachel Reeves will present to Parliament the Office for Budget Responsibility’s latest forecasts, which in our opinion are only likely to be tweaked. The media briefing from the Treasury has been that no major announcements are planned. There might though be some hints on the government’s thinking on what measures are under consideration for the next Autumn Budget.
This week also sees data released on consumer credit in the UK, and the labour market in the USA.
This week’s figures
MONDAY 2 March
UK Consumer Credit, January
£1.5bn PREVIOUS
£1.7bn FORECAST
The January UK retail sales figures were relatively strong, and driven by more expensive goods, which makes use suspect shoppers may have taken on more debt.
FRIDAY 6 March
US Non-farm Payrolls, February
130k PREVIOUS
85k FORECAST
The January payroll increase was stronger-than-expected, and largely driven by the healthcare and social care industries. We believe there will be some deceleration in February.
