27 February 2026: Taylor predicts three base rate cuts in 2026

Bank of England Governor Andrew Bailey launched a fresh bid to smooth the flow of traditional money across national borders after officials acknowledged it’s “unlikely” countries will meet goals set for 2027.

Bailey, in his role as chair of the Financial Stability Board, convened a summit of central banks and private-sector investors in London on 12 March to discuss ways to reinvigorate the work. The event is likely to be a mixture of private and public discussion.

Bailey plans to kick off the meeting by setting out his initial proposals, and Bank of Italy Governor Fabio Panetta, in his role as chair of the FSB Cross Border Payments Coordination Group, will also address the event.

Bailey had made cross-border payments a key priority since becoming chair of the Basel-based FSB last summer.

The group, which convenes the world’s most influential Central Banks and other financial officials, was tasked by the Group of 20 in 2021 with overhauling slow and costly cross-border payments.

The backdrop then was mounting nervousness over Facebook’s ultimately-abandoned plans to launch a digital currency. Now, the role of traditional Central Bank money is once again under threat by the growth of cryptocurrencies, particularly stablecoins, which can offer a faster and cheaper alternative for international payments.

Progress on the FSB work has been patchy. In October, officials noted that while most of the actions on their roadmap had been completed, real-world improvements were slow to follow; however, the average cost of cross-border payments “remains high.”

“It is unlikely that satisfactory improvements at the global level will be achieved in line with the 2027 Roadmap timetable,” the FSB said, calling on jurisdictions to take “tangible steps” to improve and the private sector to engage.

Alan Taylor, the most recent addition to the Monetary Policy Committee (MPC), has reiterated his belief that there could be three rate cuts this year, as easing inflation and a softer labour market have shifted the outlook for interest rates.

The comments were made as Taylor spoke to bankers and City analysts ahead of a Treasury hearing, where Governor Andrew Bailey and committee members were questioned on the pace of future reductions.

Taylor told the gathering that the jobs market was “converging on a pessimistic outlook”, adding, “I have become more reassured that we are proceeding towards inflation normalisation at a reasonable pace. We might see two or even three rate cuts to go before the neutral level is reached.”

He also suggested inflation might even undershoot the Bank’s two percent target. Official figures last week showed CPI inflation easing to 3% in January from 3.4% in December, driven by lower petrol prices and cheaper food and airfares.

Taylor said services inflation remained an area that policymakers were watching closely because of its link to wages and domestic demand. He also pointed to external risks, telling the audience the US had become a “high tariff regime.

Taylor has been one of the more dovish voices on the MPC over the past 18 months, often backing larger rate cuts than his colleagues, but if his prediction proves correct, the base rate could fall to 3.0% by the end of the year.

Chancellor Rachel Reeves’ spring statement is deliberately being framed as a counterpoint to last November’s far more contentious budget.

Where the autumn package sparked weeks of political and market turbulence, this intervention appears designed to do the opposite: reassure rather than excite. As one Treasury Official put it to the Financial Times, “It will be a very, very boring spring statement showing the plan is working. There will be no gimmicks. We promised one fiscal event a year, and that’s what we’re doing.”

The Treasury is making every effort to play down the statement to be delivered next Tuesday, following the near farce of the November Budget.

Sterling traders have had very little to “get their teeth into” over the past week as the pound has drifted higher on trade flows. It has so far risen to a high of 1.3573, but returned close to its starting point yesterday, closing at 1.3496.

Federal Reserve Governor Stephen Miran threw his weight behind a full percentage point of rate cuts this year, sharpening an already tense debate over how quickly the Central Bank should ease financial conditions for borrowers.

In a Fox Business interview, he framed the case not around inflation, which he argued has largely been tamed, but around the job market, which he said still needed support.

Miran said four-quarter‑point cuts “are appropriate” for 2026 and that he would “rather get them sooner than later,” pointing to lingering risks for workers even after a surprisingly strong January payrolls report.

In an interview reminiscent of those given by President Trump over the past few months, Miran chose to ignore parts of the economy that didn’t suit his narrative, even as several of his colleagues are cautiously suggesting a rate hike to calm what has become a “sticky” level of inflation.

“I think it’s way too early to sort of sound all clear that the labour market doesn’t need more support from the Federal Reserve,” he said.

“I definitely think the labour market can be supported further.”

He also downplayed the threat of resurgent price pressures. “I really do not think that we have an inflation problem,” Miran said, adding that recent readings running about a percentage point above the Fed’s target were likely to slow.

So, he feels that the January jobs report was a one-off, while an inflation rate that appears stuck around 1 percent above the Fed’s target is not a concern. Neither statement has data to support it.

His assessment went further than many private‑sector economists who have urged the central bank to move cautiously, given still‑elevated core inflation.

The timing of any easing could prove as important as the total size. Thirty‑year mortgage rates in the US have typically moved ahead of Fed decisions, responding to expectations about the path of policy rather than to individual meetings.

The average 30-year, fixed-rate mortgage is at 5.98% this week, according to a new report from the Federal Home Loan Mortgage Corp., commonly known as Freddie Mac.

The last time mortgage rates were this low was in September 2022.

Real estate experts say it's a psychologically important milestone for homeowners who've clung onto their older, cheaper rates and would-be buyers scared off by high interest payments, creating an uncomfortably tight housing market.

After the lows of the pandemic years, when the average mortgage was closer to 2.5%, the Federal Reserve began raising interest rates, and mortgage rates surged along with them.

Several FOMC members, particularly those with responsibility for the Regional Federal Reserve Banks, have recently spoken, in what appears to be a coordinated manner, about how rising legal fights and public attacks on the Federal Reserve are undermining confidence in its independence.

Raphael Bostic, the soon-to-retire President of the Atlanta Federal Reserve, said the Fed’s biggest asset is credibility, and that “legal and rhetorical battles” are making more Americans think the Central Bank can be pushed around.

Research and real-world experience suggest that more independent Central Banks tend to deliver lower, steadier inflation because households and businesses can plan with confidence.

The dollar index appears to shrug off this week’s State of the Union address as a little more than an exercise in “tub-thumping” by a President who may lose control of Congress and possibly the Senate in November.

The Greenback has traded well within its past four weeks’ ranges so far this week, trading between 98.00 and 97.35, and closing yesterday at 97.65.

“When it comes to artificial intelligence, Europe is far behind the US and China in technology”.

“However, in terms of productivity gains from workplace AI use, Europe is not lagging,” Christine Lagarde, President of the European Central Bank, told the European Parliament yesterday.

“Europe is equally moving and equally benefiting from those productivity increases, including in the SME sector, that’s what our data and our surveys are telling us,” she told MEPs of the economy committee.

Cautioning that the data is only just “beginning” to show productivity gains, she said these gains appear similar across US and EU markets, even though investment patterns differ, with the U.S. keen to try fresh innovations. At the same time, in Europe, “ we are a little more conservative”.

While the US dominates funding for the development of frontier AI systems, Europe is seemingly keeping pace with the uptake of existing tools across firms and sectors.

We’re seeing significant investment in Europe as well for the diffusion of artificial intelligence in multiple sectors of the economy,” said Lagarde.

According to AI investment data published by the OECD in February, three-quarters of all AI venture capital in 2025, $194bn, is allocated to firms in the US, while the EU pulled in $15.8 billion, trailed by China’s $13.9bn.

Lagarde also said that the bank would “look very carefully” for signs that the adoption of AI would result in job losses. So far, “we are not yet seeing the waves of redundancies that are feared,” but “we will be extremely attentive going forward.”

This follows comments made by US Federal Reserve Governor Michael Barr, who warned a gathering of economists and analysts last week that rapid AI advances could produce a “jobless boom” that could leave many people “essentially unemployable.”

He also urged policymakers to prepare and be “clear-eyed” about labour market risks as generative AI expands.

“We don’t know yet what the impact on the labour market will be, but we are looking very carefully,” Lagarde said.

German Chancellor Friedrich Merz said on the last day of his trip to China yesterday that he will ask Minister for Economic Affairs Katherina Reiche to visit China later this year for "follow-up" meetings.

I leave this country with deep impressions. We have good cooperation with China," Merz said during a visit to the city of Hangzhou, where he led a delegation of German business representatives.

However, he reiterated that some issues remain, including China's overcapacity, which is a "problem for Europe, as the capacity far exceeds market demand." He suggested that Germany and China should continue to address the issue together. This may be a hard pill for China to swallow.

The Euro has become becalmed over the past few trading sessions. Yesterday, the common currency fell to a low of 1.1771 and closed at 1.1803.

Have a great day!