The week ahead 20 April 2026 - Bank of England Governor talks down rate hike prospects
What to watch out for in the UK economy and property market this week.
Last week saw the Governor of the Bank of England, Andrew Bailey, talk down the prospect of imminent hikes to the Base Rate. Bailey said in a media interview: “We're not going to rush to judgements on those things, because there are a lot of uncertainties around this, not just how it's going to play out, but also how it's going to pass through into the UK economy.” Typically, central banks ‘look through’ sudden spikes in energy prices, and only start to take them into account if they become prolonged. Some mortgage lenders reduced rates following the Governor’s comments.
Interestingly, 10-year Gilt yields on Friday afternoon were at 4.66%, down from 4.77% a week earlier, following Governor Bailey’s remarks plus better news from the Middle East. Last Thursday, the UK government held a Gilt auction where the amount of money bidding was over three times higher than the value of the bonds being sold.
In other economic news, the UK’s GDP expanded by 0.5% month-on-month in February, exceeding a consensus forecast of 0.1%. Encouragingly, the three largest sectors of the economy all saw growth – services by 0.5%, industrial production by 0.5% and construction by 1.0%. This data relates to February, so pre-dates the Middle East conflict. The GDP figures though do suggest the British economy went into the war a little stronger than had been previously assumed.
Meanwhile, the IMF became the latest renowned forecaster to downgrade its outlook for UK economic growth, and flag Britain’s vulnerability should the rise in gas prices become protracted. This strengthens our view that over the long-term the war will spur investment into renewable energy.
This is set to be a busy week for UK economic data, with the release of figures on the labour market, inflation, business activity and retail sales.
The financial markets will be carefully scrutinising the inflation data. While it is a near certainty the headline rate of inflation will increase, due to high automotive fuel prices, analysts will be looking closely at the ‘core inflation’ reading, which excludes food and fuel, and is expected to still decline, despite the war. If this indicator comes in higher than predicted it would cause concern.
The retail sales data will be out on Friday. We already have some indication of what to expect, as the British Retail Consortium (BRC) released figures last week that pointed to a healthy rise in activity in March. However, that was in part due to the run up to Easter boosting sales, which suggests the April retail sales figures will be the true test of whether consumers are still spending.
This week’s figures
TUESDAY 21 APRIL
UK Unemployment Rate, February
5.2% PREVIOUS
5.3% FORECAST
Survey evidence largely points to firms being reluctant to take on new staff, with many looking to Artificial Intelligence to carry out more tasks. Consequently, we believe the unemployment rate rose in February.
WEDNESDAY 22 APRIL
UK CPI Inflation, y-on-y, March
3.0% PREVIOUS
3.4% FORECAST
Given the sharp rise in petrol and diesel prices, an increase in the headline rate of inflation is a near certainty for March. The markets will be watching core inflation closely, as it excludes fuel and food prices, for a better gauge of inflationary pressures.
THURSDAY 23 APRIL
UK Composite ‘Flash’ PMI, April
50.3 PREVIOUS
50.1 FORECAST
We believe the Middle East war has dampened activity in the commercial side of the economy, probably hitting new orders. Our prediction is another decline for the PMI index.
FRIDAY 24 APRIL
UK Retail Sales, m-on-m, March
-0.4% PREVIOUS
0.5% FORECAST
Normally, one would expect the March retail sales figures to benefit from Spring fashions reaching the shops. Also, initial evidence from the BRC suggests March was a good month, despite the war. We are forecasting a return to growth.
