The Bank of England has maintained its interest rates at 4.5%, keeping steady amid a backdrop of escalating global uncertainty and rising inflation. This decision was made by the central bank’s Monetary Policy Committee (MPC), which opted against further rate cuts following three reductions in the past year. The financial markets had largely foreseen this move, especially after Threadneedle Street lowered the key base rate in February and cut the UK’s growth forecast in half.

This decision preempts the chancellor, Rachel Reeves’s, spring statement to the Commons, scheduled for the following week. The statement comes at a time when the UK’s economic growth has been sluggish, worsened by the unexpected contraction in January and a near stall in the latter half of the previous year. Concerns over Donald Trump’s trade policies and their potential impact on the global economy intensify the need for careful economic management.

Inflation remains above the Bank’s target of 2%, with expectations of further increases as household energy costs rise and businesses adjust to measures from Reeves’s October budget take effect in April. There are apprehensions from industry groups regarding the potential inflationary impact of the proposed £25 billion rise in employers’ national insurance contributions and the 6.7% increase in the minimum wage due in April.

Although inflation peaked at over 11% in the second part of 2022, triggered by a surge in energy costs following Russia’s invasion of Ukraine, it has seen a slight recovery in recent months, rising from 2.5% in December to 3% in January. The Bank of England suggests that borrowing costs are likely to decrease in the coming months, but economists argue that rates may need to remain higher to combat persistent inflationary pressures, despite the economic slowdown experienced in the latter part of the previous year.

Source: https://www.theguardian.com/business/2025/mar/20/bank-of-england-holds-interest-rates-inflation-uk-economy