The Bank of England is set to maintain its base rate at 4.5% when its Monetary Policy Committee (MPC) announces its latest decision on Thursday, as policymakers weigh inflation risks against economic growth.
With inflation rising to 3% in January, analysts predict the Bank will take a cautious approach, despite market expectations of two further rate cuts by the end of 2025. The decision will have widespread implications for households, businesses, and investors, affecting everything from mortgage rates to borrowing costs.
The MPC, chaired by Bank of England governor Andrew Bailey, meets eight times a year to set interest rates with the aim of keeping inflation at the government’s 2% target. Its decisions significantly influence the cost of borrowing, including mortgages, business loans, and credit cards, while also impacting savings returns.
Although the Bank has already made three rate cuts since August 2024—bringing the base rate to its lowest level in 18 months—officials have warned of lingering inflationary pressures and global economic uncertainty.
“Bank of England policymakers have been warning on inflation and lingering uncertainty, so further rate cutting relief for homeowners looks to be an unlikely outcome from this month’s meeting,” said Paul Heywood, chief data and analytics officer at credit agency Equifax UK.
While mortgage rates have been slowly declining in anticipation of future cuts, the Bank has signalled a “gradual and careful” approach, meaning borrowers hoping for immediate relief may need to wait longer.
The Bank’s decision comes as Chancellor Rachel Reeves prepares to deliver her Spring Statement next week. While major policy changes are not expected, the statement will provide updated economic forecasts from the Office for Budget Responsibility, including key insights into government spending plans.
The UK economy continues to underperform, with the Bank halving its 2025 growth forecast to 0.75%, down from 1.5%. Inflation is also projected to rise to 3.7% before gradually easing towards the 2% target by 2027.
External factors, such as global trade policies and US tariffs, are further complicating the outlook, adding to uncertainty around future interest rate decisions.
For now, the Bank’s cautious stance signals stability in the short term, but businesses, homeowners, and investors will be closely watching for signs of further cuts as the year progresses.
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Bank of England expected to hold interest rates at 4.5% amid inflation concerns
