The Bank of England kept its key interest rate at 4.5 percent yesterday, as it warned of “a lot of economic uncertainty” caused largely by US President Donald Trump’s tariffs.
The bank left borrowing costs at 4.5 percent, opting against a fourth cut in seven months despite stagnant UK economic growth as inflation stays elevated.
On Wednesday, the US Federal Reserve and Bank of Japan held borrowing costs steady, while Switzerland’s central bank trimmed rates yesterday.
Photo: Andy Rain, EPA-EFE
“There’s a lot of economic uncertainty at the moment,” Bank of England Governor Andrew Bailey said in a statement. The bank noted in minutes of a regular policy meeting that “global trade policy uncertainty has intensified.”
“Other geopolitical uncertainties have also increased and indicators of financial market volatility have risen globally. “The German government has announced plans for significant reform to its fiscal rules,” the central bank said.
Bailey added that the bank still thinks “that interest rates are on a gradually declining path.”
Analysts said this indicated, as expected, that the bank would cut at its next regular monetary policy meeting in May.
Official data released yesterday showed that while British unemployment steadied at the start of the year, wages growth remains far above the annual inflation rate.
At the same time, the consumer price index jumped more than expected to 3.0 percent in January, which is above the central bank’s two-percent target.
The UK economy meanwhile unexpectedly shrank in January.
“We’ve had three rate cuts since the summer, but there’s still work to do to ease the cost of living,” British Chancellor of the Exchequer Rachel Reeves said in reaction to the latest central bank decision, backed by eight of the Monetary Policy Committee’s nine policymakers, including Bailey.
Last month, the central bank halved its forecast for the UK’s total output this year, blaming global risks amid US tariff threats and deteriorating UK business confidence.
That came as the central bank last month cut its key interest rate by a quarter point, easing slightly the pressure on the UK government, which is struggling with tight public finances.
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