Bank of England Holds Interest Rates Amid Rising Global Trade Uncertainty

London, U.K. – The Bank of England (BoE) left interest rates unchanged on Thursday, maintaining its benchmark rate at 4.5% as the economy grapples with global trade uncertainty and signs of domestic stagnation.

Monetary Policy Committee Decision

In a widely anticipated move, the BoE's Monetary Policy Committee (MPC) voted 8-1 to keep rates steady. One member favored a 25-basis-point cut, signaling a cautious approach to easing policy.

"Since the MPC’s previous meeting, global trade policy uncertainty has intensified, and the United States has made a range of tariff announcements, to which some governments have responded," the central bank stated.

The statement also cited geopolitical uncertainties and rising financial market volatility as key concerns influencing its decision.

Economic Outlook and Policy Implications

The rate decision comes amid economic headwinds at home and abroad. The U.K. economy contracted by 0.1% in January, raising concerns over growth prospects. In February, the BoE halved its 2025 growth forecast to 0.75%, reflecting a weaker-than-expected recovery.

At the same time, inflation remains a pressing concern. The central bank expects consumer price inflation (CPI) to rise to 3.7% in Q3 due to surging energy costs. January’s inflation reading of 3% exceeded market expectations, reinforcing the BoE’s cautious stance.

Market Reaction and Expert Analysis

Paul Dales, Chief U.K. Economist at Capital Economics, noted that while the BoE maintained rates as expected, its tone was more hawkish than in February. “There appears to be diminishing appetite for cutting rates faster, with a growing preference to maintain the current pace at best,” he said.

Financial markets reacted swiftly to the decision:

• The British pound fell 0.3% against the U.S. dollar by midday in London.
• U.K. government bond yields (gilts) edged lower, with 10-year gilt yields dropping by over four basis points.

Hussain Mehdi, Investment Strategy Director at HSBC Asset Management, described the meeting as a balancing act for the BoE. “A stagflationary tone to recent economic data means the MPC is weighing inflation risks against weak growth and fragile confidence,” he said.

What’s Next for Interest Rates?

The BoE emphasized that its future rate decisions would depend on economic conditions. The statement suggested that:

• If demand weakens further, monetary policy could be loosened to counteract deflationary pressures.
• If inflation remains persistent, particularly due to wage growth and supply constraints, the BoE may maintain a more restrictive policy stance.

Thursday’s meeting also comes ahead of the U.K. Treasury’s Spring Statement on March 26, where Chancellor Rachel Reeves is expected to outline fiscal plans amid rising borrowing costs and growing pressure to manage public spending and taxation.

With trade tensions escalating and the domestic outlook uncertain, the Bank of England's cautious stance underscores the delicate balance between controlling inflation and sustaining economic growth.