Bank of England keeps Interest Rates Steady at 4.5%

The Bank of England kept interest rates at 4.5%, indicating the possibility of a cut later this year, given global trade tensions and persistent inflationary pressures in the UK.

The Monetary Policy Committee voted 8-1 to hold rates, with external member Swati Dhingra calling for a quarter-point cut.

Governor Andrew Bailey explained that the Bank expects a gradual rate cut, with close monitoring of global and domestic economic developments at regular meetings.

This decision follows a quarter-point cut last month and a revised 2025 growth forecast to 0.75%.

Bank Governor Andrew Bailey revealed that the overall path of interest rates remains gradually downward, but indicated that current conditions require caution in making any future decisions.

The decision coincided with escalating trade tensions, fueled by Washington's imposition of new tariffs, prompting reactions from several countries.

These developments cast a shadow over growth and inflation expectations. The US Federal Reserve lowered its forecast for economic growth this year and raised its inflation estimate, warning of increased uncertainty.

The Bank of England also pointed to increased "geopolitical pressures," highlighting Germany's massive borrowing plans, reflecting broader concerns about the future of the European economy.

On the domestic front, the central bank partially blamed higher corporate taxes, which it believes contributed to higher prices in the services sector. 

Recent data also showed a decline in hiring intentions among companies, raising questions about the strength of the labor market. Inflation reached 3% in January and is expected to rise further throughout the year, exceeding the Bank's 2% target. 

Data also showed wage growth rising by 5.9% in the three months to January, adding to inflationary pressures.