The Bank of England has held interest rates at 4.5 per cent as worries over a global trade war flare up.
Dovish rate-setter Swati Dhingra, an external member on the Monetary Policy Committee (MPC), was the lone wolf who voted for a 25 basis point cut.
The decision saw Catherine Mann split from Dhingra after the pair voted for a radical 50 basis point cut in February.
Pessimism over UK growth continued as President Donald Trump’s sweeping tariffs, including on steel and aluminium, has put the Bank’s economists on edge.
It also stuck by its February prediction that inflation could hit a peak of 3.75 per cent this year.
Inflation hit three per cent in January, with figures for price rises in February set to be released next Wednesday ahead of Chancellor Rachel Reeves Spring Statement.
Office for National Statistics (ONS) figures released this morning delivered an ominous warning to forecasters measuring inflation.
Wage growth of 5.9 per cent between November 2024 and January 2025 was likely to exacerbate inflation.
Capital Economics economist Ruth Gregory said earlier today the figures had left the Bank in a “tricky position”.
Many City analysts had expected the Bank of England to hold its interest rates, with economists and business leaders believing that a cut in May was more likely.
US Fed sets trend
The Bank followed a decision by the US’s Federal Reserve to hold interest rates last night.
The Fed held rates at about 4.5 per cent, partly due to President Donald Trump’s extreme tariffs agenda.
The Fed also revised America’s economic outlook as it cut its growth forecast to 1.7 per cent from 2.1 per cent.
It also predicted inflation could approach nearly 3 per cent.
Fed Chair Jerome Powell said that “further progress” to the world’s biggest economy may be delayed as a result of the uncertainty brought by Trump’s flip-flopping on policy.