The Bank of England has left interest rates unchanged at 4.5%, with the Monetary Policy Committee (MPC) voting 8-1 in favor of the decision. The central bank acknowledged that global trade policy uncertainty has intensified, with recent tariff announcements from the United States prompting responses from various governments. Paul Dales, U.K. chief economist at Capital Economics, noted that the vote was more hawkish than expected, with only one MPC member voting for a cut compared to three in December.
The decision comes as the U.K. economy faces uncertainty around global trade and stagnation at home, with the BOE halving its 2025 growth forecast for the U.K. to 0.75%. Hussain Mehdi, investment strategy director at HSBC Asset Management, commented that the meeting was “challenging” due to the murky outlook, with the MPC balancing inflation considerations against downside growth risks and fragile confidence.
Bank of England rate decision
The BOE suggested a gradual approach to withdrawing monetary policy restraint, dependent on economic developments. The central bank stated that greater or longer-lasting weakness in demand relative to supply could push down on inflationary pressures, warranting a less restrictive path of Bank Rate. Conversely, a more constrained supply relative to demand and persistent domestic wage and price pressures could necessitate a tighter monetary policy path.
The British pound was down 0.3% against the dollar after the decision, while yields on British government bonds edged lower. The meeting comes just days before U.K. government taxation changes and the upcoming “Spring Statement” from British Chancellor Rachel Reeves, who faces pressure to cut public spending, raise taxes further, or bend fiscal rules amid higher borrowing costs.
Photo by; Kai Pilger on Unsplash