The Bank of England has held interest rates at 4.5%, warning that uncertainty around the global economy and trade has intensified. The decision was expected, with the Monetary Policy Committee voting 8-1 in favour. Governor Andrew Bailey said rates remain on a “gradually declining path”, and many economists anticipate two more cuts before the end of the year – possibly the next in May.
The base rate influences borrowing and saving costs across the UK. Around 600,000 mortgage holders on tracker deals will see no immediate change. However, over 80% of borrowers are on fixed-rate deals and will face higher repayments when those end. Mortgage rates have edged down recently – the average two-year fix now stands at 5.33%, with five-year deals at 5.18%.
Meanwhile, US trade tariffs and retaliatory measures from partners like the EU are adding pressure on UK exporters. The Bank said many firms are pausing hiring or cutting investment as they face further tax increases, including a rise in National Insurance contributions next month.
The Bank also noted nervousness among UK businesses over the impact of tariffs, particularly those exporting to the US. President Trump’s measures aim to support domestic industry but risk increasing consumer prices.
Inflation also remains a concern. The Bank expects it to rise to 3.7% this year and stay above its 2% target until at least the end of 2027. Economic growth forecasts have been cut in half – a setback for the Government’s growth ambitions.
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