Bank of England leaves interest rates on hold
By Abigail Townsend
Date: Thursday 20 Mar 2025
(Sharecast News) - The Bank of England left the cost of borrowing at 4.5% on Thursday, in a widely-expected decision.
In its last meeting before next week's Spring statement, the Monetary Policy Committee voted by a majority of eight to one to leave interest rates unchanged. External member Swati Dhingra argued for a 25 basis point cut.
At the MPC's last meeting in February, a majority of 7-2 voted for a 25bps cut.
Thursday's decision coincided with employment data from the Office for National Statistics.
It showed that UK wage growth was 5.9% in the three months to January, despite employment increasing by just 0.1% over year.
The MPC is facing a balance as it looks to ensure a sluggish jobs market and economy do not deteriorate further without stoking already-mounting price pressures. Rises in both National Insurance employer contributions and the National Living Wage are due to come into effect next month.
Inflation rose to 3% in January, in line with expectations but above the BoE's 2% target, while GDP shrunk by 0.1%.
The MPC said that since its previous meeting, "global trade policy uncertainty has intensified, and the United States has made a range of tariff announcements, to which some governments have responded.
"Other geopolitical uncertainties have also increased, and indicators of financial market volatility have risen globally."
The committee reiterated that a "gradual and careful approach" to withdrawing monetary policy restraint therefore remained "appropriate".
Most economists expect the next rate cut will be in May.
Alpesh Paleja, deputy chief economist at the CBI, said: "Today's announcement was in line with the cut/hold tempo on interest rates that we expect for the rest of the year.
"This understandable caution largely reflects a growing trade-off facing the MPC. Activity remains weak, but this doesn't seem to be having much of an impact on inflationary pressures yet.
"While interest rates are likely to be cut further this year, the path down will remain gradual."
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Given that storms threaten to whip across the global economy, policymakers have opted not to rock the boat. Like the Federal Reserve, the BoE has opted for a 'wait and see' policy, given the uncertainty.
"Stagflation has reared its head and does not look like it's going to back away soon, which is set to keep decision-making difficult.
"But concerns about growth may soon start to outweigh worries about sticky prices. The UK...won't be isolated from the turmoil [of trade tariffs] giving that its trading relationships stretch right across the world."
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