LONDON, March 20, 2025 (AP) — Despite ongoing challenges in the UK economy, including sluggish growth and rising inflation, the Bank of England is expected to maintain its main interest rate at 4.50% in Thursday’s decision. The move comes even as the country faces increasing economic uncertainty, partly driven by potential trade disruptions due to U.S. tariff policies under President Donald Trump’s administration.
The Bank of England’s nine-member Monetary Policy Committee is poised to hold rates steady, as inflation continues to run above the bank’s 2% target. In January, UK inflation surged to a 10-month high of 3%, and economists predict it could climb to 4% in the coming months. This rise is partly due to firms increasing prices in response to a significant boost in the minimum wage and higher payroll taxes.
Though inflation has eased from its multi-decade highs above 10%, the committee has lowered the main interest rate from a peak of 5.25% by a series of quarter-point cuts since last August. The most recent reduction occurred in February. A gradual approach to monetary policy is expected, with the possibility of another rate cut at the Bank’s next meeting in May, pending updated economic projections and a press conference by Governor Andrew Bailey.
The UK economy, the sixth-largest in the world, posted a modest growth of just 0.1% in the fourth quarter of 2024, disappointing expectations and leaving the Labour government under Prime Minister Keir Starmer under pressure to boost economic performance. Since the global financial crisis of 2008-09, the UK’s growth has consistently lagged behind long-term trends.
Critics have pointed to Treasury Chief Rachel Reeves, accusing her of being overly pessimistic since Labour regained power in July. Her approach, which includes raising taxes on businesses, has been linked to the country’s economic underperformance.
Complicating matters further are concerns over the impact of U.S. tariffs, which economists fear could slow global growth and contribute to higher prices. The UK government hopes to secure a modest trade deal with the U.S. to avoid widespread tariffs on British imports.
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