The Bank of England has decided to keep its base interest rate at 4.5%, a move that comes as no surprise to most analysts. This cautious approach reflects the central bank's ongoing effort to navigate between persistent inflation and a sluggish UK economy.
Following a modest rate cut of 0.25% in February, the Bank's Monetary Policy Committee (MPC) has chosen to pause further changes for now. Since last August, borrowing costs have been gradually lowered, which has allowed some lenders to slightly reduce mortgage rates-a bit of relief for certain homeowners.
Andrew Bailey, Governor of the Bank of England, stressed the importance of proceeding carefully. "We're taking a gradual and thoughtful approach," he said, highlighting that decisions are being made with both domestic and global economic factors in mind.The decision to hold rates didn't come as a shock. In fact, a recent survey from buy-to-let mortgage lender Landbay showed that 76% of specialist brokers expected the Bank to keep rates unchanged.The bigger picture, however, paints a mixed economic outlook.
The UK’s GDP shrank by 0.1% in January, inflation has reached its highest level in ten months, and private sector wages are still climbing, up 6.2% - all signs of ongoing economic strain.Nicholas Mendes, mortgage technical manager at broker John Charcol, pointed to international concerns as additional pressure points. "Uncertainty around U.S. trade policy and possible new tariffs are rattling markets," he said. He also mentioned that the upcoming Spring Statement from the UK government could introduce new fiscal tightening, which would only add to the financial pressure on households and businesses.
While today's decision to hold rates was widely predicted, some had hoped for another rate cut in the near future. Forecasts suggest the Bank may lower rates up to four times this year, but for now, officials are holding back - waiting for more solid evidence that inflation is under control."Inflation hit 3% in January and could rise further into the summer," Mendes noted. "With that in mind, the Bank is treading carefully to avoid undoing the progress made so far."For the time being, the central bank is staying put, closely monitoring the data. With signs of a softening job market and lingering concerns about business investment, the debate over future rate cuts is far from settled. But as today's decision shows, the MPC isn't quite ready to make the next move just yet.
