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The Bank of England has kept interest rates on hold at 4.5 per cent, while leaving the door open to further reductions this year as it grapples with both global trade tensions and continuing price pressures in the UK.
The Monetary Policy Committee voted eight to one to leave the bank’s benchmark rate unchanged as it reiterated plans to pursue a “gradual and careful” approach to further cuts.
Swati Dhingra, an external member of the MPC and long-standing dove, voted for a quarter-point reduction in rates.
“There’s a lot of economic uncertainty at the moment,” said Andrew Bailey, BoE governor. He added that, while the bank had held rates at 4.5 per cent, “we still think that interest rates are on a gradually declining path”.
Thursday’s decision followed a quarter-point cut last month, when the BoE also halved its 2025 growth estimate to 0.75 per cent.
“We’ll be looking very closely at how the global and domestic economies are evolving at each of our six-weekly rate-setting meetings,” Bailey said. “Whatever happens, it’s our job to make sure that inflation stays low and stable.”
Inflation reached 3 per cent in January, and is set to climb further above the central bank’s 2 per cent target by mid-year.
Figures published earlier on Thursday showed wage growth remaining strong, at a 5.9 per cent annual rate for the three months to January, excluding bonuses.
Before the MPC meeting, traders had fully priced in two further quarter-point cuts to base rates this year, with the first expected to come in June, according to the levels implied by swaps markets.
The pound crept higher after the decision, down 0.2 per cent on the day at $1.298 after having fallen earlier in the day.
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