As it continues to evaluate inflation trends and the state of the UK economy, the Bank of England (BoE) has chosen to maintain interest rates at 4.5%. With one member calling for a cut to 4.25%, the Monetary Policy Committee (MPC) voted 8-1 to keep the current rate in place.
Inflationary pressures continue to be a major concern, according to the BoE. Inflation in the UK is expected to increase to 3.75% by the third quarter of 2025, despite signs of a slowdown in global energy prices.
Since inflation is still higher than the central bank's 2% target, policymakers think that in order to stop ongoing price increases, a restrictive policy stance must be maintained.
According to the Bank:
"Domestic price and wage pressures are moderating but remain elevated."
It emphasised that although inflation has decreased from its highest point, the battle to keep prices stable is far from over. The central bank is dedicated to keeping inflation under control while keeping an eye on threats to the world economy.
Mortgage holders might not experience an instant reduction in borrowing costs as a result of the decision to hold rates. Lenders briefly offered mortgage rates below 4% in recent months, but they were swiftly removed because of market volatility.
According to industry experts, more clarity on future interest rate movements will be necessary for mortgage rates to be reduced consistently.
Matt Smith, a mortgage expert with Rightmove, stated:
"Mortgage rates have stayed relatively stable since the last decision in February."
However, borrowers hoping for lower rates might have to wait longer if there isn't a major change in policy.
The BoE's decision was also influenced by growing uncertainty surrounding international trade. The United States' announcement of new tariffs has raised concerns about a possible trade war. Businesses and consumer confidence may be impacted by such developments in the UK economy.
BoE Governor Andrew Bailey acknowledged the challenges ahead:
"There is a great deal of economic uncertainty at the moment. To make sure inflation stays steady, we are keeping a careful eye on both domestic and international developments."
With a 77% chance of a rate cut in May and further reductions anticipated later in the year, financial markets are factoring in the possibility of a policy shift in the coming months.
If inflation continues to decline, analysts estimate the BoE may cut rates to 3.5% by early 2026.
Interest rate decisions significantly impact financial markets, creating trading opportunities. At KQ Markets, you can trade on interest rate fluctuations using CFD Futures.
The Bank of England's decision to hold rates at 4.5% reflects a cautious approach to balancing inflation control and economic stability. As the UK navigates ongoing global economic uncertainties, businesses, borrowers, and traders will be closely watching for future adjustments.
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