The Bank of England (BoE) voted 8-1 to keep the Bank Rate at 4.5% during its March 2025 meeting, a decision that was widely anticipated by market analysts. One committee member advocated for a 25 basis point reduction to 4.25%, but the majority preferred to maintain the current rate.
BoE holds rates as widely expected
In its statement, the Monetary Policy Committee (MPC) highlighted the notable progress made in reducing inflation over the past two years, largely driven by the waning effects of previous external shocks and the effectiveness of tighter monetary policy in curbing inflationary pressures.
However, the MPC acknowledged growing concerns regarding global trade disruptions and escalating geopolitical risks, which continue to cloud the economic outlook. Despite these risks, UK GDP growth has slightly exceeded expectations, though business surveys have pointed to weaker growth and a cooling labor market. Consumer Price Index (CPI) inflation increased to 3.0% in January, with a notable dip in global energy prices. Yet, inflation is projected to rise to around 3¾% by the third quarter of 2025, driven by underlying pressures in certain sectors.
MPC reiterated its commitment to a cautious approach
In response, the MPC reiterated its commitment to a cautious approach in adjusting monetary policy. They emphasized that future decisions will be data-dependent, factoring in the evolving dynamics of demand, supply, and inflationary pressures. The committee underscored the need to remain flexible, adjusting policy as necessary to stabilize the economy and meet its inflation target in a context of rising uncertainties.
