Investing.com - The Bank of England kept its key interest rate unchanged Thursday, as widely expected, maintaining its cautious data-dependent approach to future policy.
The U.K. central bank maintained its benchmark Bank Rate at 4.5%, after eight of the Monetary Policy Committee voted to leave rates unchanged at this March meeting, while one supported a quarter-point cut.
Policymakers slashed borrowing costs to this level in February, flagging sluggish economic growth in the U.K., but noted that it would take a gradual approach to further reductions because of uncertainty clouding the outlook.
The U.K. economy grew by just 0.9% in 2024, and at the February policy meeting, the policymakers cut growth forecasts for 2025 by half to just 0.7%.
U.K. employment surveys have weakened notably in recent months as companies grapple with the rise in employers’ national insurance contributions and the minimum wage that were announced in the October 2024 Budget.
A much-anticipated speech from Chancellor of the Exchequer Rachel Reeves is also scheduled for next week, at which she is tipped to announce reductions to public spending -- a major source of U.K. economic growth.
At the same time, U.K. consumer inflation rose to 3.0% on an annual basis in January, a full percentage point above the BoE’s medium term target, and higher domestic fuel costs could push consumer prices further upwards in the coming months.
Inflation is seen reaching 3.7% later this year, according to Bank of England estimates released in February.
The Bank’s call mirrored a decision taken by the Federal Reserve a day earlier, as uncertainty swirls around the broader impact of U.S. President Donald Trump’s tariff plans.
Trump’s threats of levies on both friendly countries and adversaries alike have exacerbated concerns over growth, and inflation, in both the U.S. and abroad.