Bank of England Holds Rates Steady Amid Growth and Inflation Uncertainty

The Bank of England (BoE) kept its key interest rate unchanged at 4.5% on Thursday, as expected, maintaining its cautious, data-driven approach amid concerns over sluggish economic growth and persistent inflation.

Key Takeaways:

• BoE’s March Decision:
  • 8 out of 9 Monetary Policy Committee (MPC) members voted to hold rates.
  • 1 member favored a 0.25% cut, reflecting rising concerns over weak growth.
• Previous Rate Cut:
  • The BoE lowered rates in February, citing a slowing economy but emphasized a gradual approach to further reductions.

UK Economic Outlook:

• GDP Growth:
  • The U.K. economy grew just 0.9% in 2024, with 2025 growth forecasts cut in half to 0.7%.
• Labor Market Struggles:
  • Surveys indicate weakening employment, as businesses deal with:
    • Higher employer national insurance contributions.
    • Increased minimum wage costs from the October 2024 Budget.
• Fiscal Policy & Public Spending:
  • A speech by Chancellor Rachel Reeves next week is highly anticipated, as she may announce cuts to public spending—a key driver of U.K. growth.

Inflation Risks Remain Elevated:

• Inflation reached 3.0% in January, exceeding the BoE’s 2% target.
• Energy prices could push inflation higher, with the BoE expecting it to hit 3.7% later in 2025.

Global Impact: Trump’s Tariff Plans Add to Uncertainty

• The BoE’s cautious stance mirrored the Federal Reserve’s decision to hold rates steady a day earlier.
• President Trump’s tariff threats on both allies and adversaries are fueling global concerns over growth and inflation, making central banks wary of premature rate cuts.

As policymakers assess economic risks from trade tensions and inflationary pressures, the BoE is likely to remain in a wait-and-see mode, balancing growth concerns with price stability.