The Bank of England’s Monetary Policy Committee (MPC) has voted to hold rates steady at 4.5% at today’s meeting, with eight members opting to stand pat while the lone dissenting voice wished for rates to fall by 25 basis points.
The pause was largely expected as inflation has remained sticky. Indeed, 12-month consumer prices index (CPI) increased to 3% in January, up from 2.5% in the final month of 2024, which was “slightly higher than expected”. Both remain above the Bank’s target of 2%.
The committee cited “intensified” global trade policy uncertainty, pointing to the US tariff announcements made by president Donald Trump as one factor for holding off on rates.
“Other geopolitical uncertainties have also increased and indicators of financial market volatility have risen globally,” the committee said in a statement.
“Domestic price and wage pressures are moderating but remain somewhat elevated. Although global energy prices have fallen back recently, they remain higher than last year and CPI inflation is still projected to rise to around 3.75% in the third quarter of 2025 . While inflation is expected to fall back thereafter, the Committee will pay close attention to any consequent signs of more lasting inflationary pressures.”
The Bank’s decision follows the US Federal Reserve, which also opted to leave rates unchanged at its meeting yesterday.
Zara Nokes, global market analyst at JP Morgan Asset Management said the Bank of England was “stuck between a rock and a hard place” as inflation is rising but the economic outlook is weak.
“While it may have been tempting for the Bank to cut rates today, ultimately the decision to hold was appropriate. Inflation and wage growth remain sticky and inflation dynamics do not look favourable in the near term as employer tax hikes, price resets and a minimum wage increase all come into effect in April,” she said.
Lindsay James, investment strategist at Quilter, said the market now expects the Bank of England to cut twice more this year, mirroring expectations for the Federal Reserve in the US.
“The Bank of England will wish to avoid cutting rates too much too quickly for fear of causing further inflationary pressure, so for now this looks reasonable,” she said.
For people in the UK, mortgages and loan rates could remain higher for longer if the Bank continues to stand still, according to Myron Jobson, senior personal finance analyst at interactive investor.
However, cash rates are likely to also stay high, benefiting those with additional savings held in higher-rate accounts.