The Bank of England (BoE) is expected to hold rates during its meeting on Thursday, March 20. The central bank has been on the side of cautious with its approach to interest rates, reflecting both domestic and global pressures.
The central bank’s decision comes at a time of rising uncertainty over trade war escalations and as the UK economy shows signs of slowdown, with growth data showing weakness. The BoE meeting also comes days before the UK government taxation changes that might pressure UK businesses, where rising taxes could impact company earnings and growth. ⁽¹⁾
Governor Andrew Bailey will speak in a press conference after the decision and will give insights on tariff impacts on the UK economy, analysis on recent data, and future outlook for 2025.
Breaking Down the Expectations
The BoE is expected to hold rates at 4.5% on Thursday, following a 25 basis point rate cut in February. Expectations from the Monetary Policy Committee (MPC) vote are pointing toward two votes in favor of a rate cut and seven for a rate hold.
The Bank of England is cautious with its approach to monetary policy changes, as Governor Bailey repeatedly stated that the MPC are committed to managing inflation and growth concerns. ⁽²⁾
The BoE’s decision also comes as policymakers assess the uncertainty emerging from US President Trump’s trade tariffs and UK tax hikes. Trump’s tariff policies have impacted financial markets and raised inflation concerns globally. ⁽³⁾
BoE policymakers highlighted the need for a cautious approach to interest rates where inflation and labor market risks need to be balanced to determine the next move on interest rates.
Bank of England Pressured by Economic Data
UK GDP for January showed that the UK economy contracted by 0.1%, caused by production and construction sector weaknesses. The report followed modest growth in the previous quarter and raised concerns on growth in 2025, where growth forecasts for the UK economy were downgraded to 0.75 % for 2025. The downgrades were caused by weak economic data and trade war impacts. ⁽⁴⁾
Inflation rose to 3% in February, above the central bank’s 2% target. Uncertainty still looms as the BoE is caught between high interest rates and weak growth. Core CPI remains more persistent than the headline numbers, which supported the MPC’s cautious stance. ⁽⁵⁾
The labor market showed signs of weakness, where unemployment claims in the UK rose to 22K in December 2024 with job openings declining. Wage growth rose to 6% and has continued to rise faster than inflation. ⁽⁶⁾
Trade War Concerns
Trade tariffs are one of the main factors that are behind the BoE rate hold expectations, with trade tensions emerging from President Trump’s tariff threats and threatening the UK’s economy. ⁽⁷⁾
The Bank of England has expressed concerns that tariffs might impact global trade, which could affect UK exports and its economic health. This factor could support a more cautious and gradual approach for the BoE.
