Bank of England leaves rates on hold in "a blow to mortgage borrowers around the UK"

As widely expected, the Bank of England decided to hold rates at 4.5% today in what many will see as a prudent decision given the persistent uncertainty in global markets and domestic inflation pressures. Last month, the Bank voted 7-2 to cut rates by 0.25%. Today’s 8–1 majority vote reflects the broad agreement that stability outweighs the risk of a premature cut, though the lone dissent for another 0.25% reduction suggests valid concern about the moribund state of the UK economy even before next month’s tax, NI and utilities increases. I expect the pressure will build for a rate cut announcement at the next meeting on 8 May. All eyes are now on next week’s Spring Spending Statement or Emergency Budget, depending on your point of view.

Caution remains the maxim of Threadneedle Street, as the Bank of England stands firm on interest rates despite the market’s hope of a dovish turn that would open the floodgates on rate cuts. This decision from the BoE was understandable and not hugely surprising given the continued inflationary pressures and forecast, with an uptick to 3% in January and expectations that this could rise further to 3.7% later in the year. However, supporting a sluggish economy is going to start becoming more of a priority, especially as the full impact of the Spring Statement is digested. Interestingly, this vote suggests a momentary return to near-consensus within the MPC, as Dhingra remained the only MPC member to vote in favour of a cut despite expectations for two dovish votes. This shift indicates that the case for aggressive easing has not yet gained traction, with the majority still prioritising inflation control over stimulus and a generally measured policy approach.

Though the decision to leave rates on hold was expected, it's still a blow to mortgage borrowers around the UK. Many households are under immense pressure from higher interest rates while the economy is also creaking and could have done with a cut. The concern, as ever, is that the Bank of England will once again find itself behind the curve.

It was no surprise that the Bank opted to leave rates unchanged today amidst a swirl of conflicting data that is hard to see through. On the one hand you have inflationary pressures that have not abated, exacerbated by the threat of tariffs and trade wars, and on the other you have a stuttering UK economy that needs a jump start. The Bank currently has a difficult balancing act and taking some time to review more data seems a sensible option. That said, the economy and the general public cannot wait too much longer, and we hope that the Bank resumes their rate cutting agenda soon.