The Bank of England has decided to keep its benchmark interest rate unchanged at 4.5%, as announced today following a vote by its Monetary Policy Committee (MPC). The decision, which saw eight of the nine committee members in favour of maintaining the current rate, comes despite signs of weakening economic growth in the UK.
The MPC cited persistent inflationary pressures as the key factor behind its cautious stance. While inflation has eased from previous highs, it remained above the Bank’s 2% target, registering at 3% in January. Additionally, the latest jobs data indicated that wages were rising at an annual rate of 5.9%, a figure that could contribute to sustained price pressures.
The decision to hold rates steady was widely anticipated by financial markets, given the ongoing inflationary risks. The committee’s move suggests that policymakers are not yet convinced that conditions warrant a shift toward easing monetary policy, despite the broader slowdown in economic activity.
This announcement comes just days before the Chancellor’s Spring Statement, in which she is expected to outline further public spending cuts in an effort to meet fiscal targets. The government’s stance on public finances is likely to be a key factor in shaping the economic outlook for the months ahead.
Neil Rudge, Chief Banking Officer for Commercial, commented on the Bank’s decision, noting that it provides a mixed picture for businesses, particularly small and medium-sized enterprises (SMEs).
“The Bank of England has chosen to keep the base rate frozen in the final decision of the tax year, with the recent uptick in inflation giving the MPC reason for pause. For SMEs, the landscape remains an uncertain one, with the looming rise in employer NIC contributions set to take effect in a matter of weeks. Additionally, our recent research into SMEs’ fears revealed that 78% are concerned about inflation, with 67% saying the same for interest rates. However, despite the hurdles that lie in wait, more than three-quarters of SMEs remain confident in their business prospects in the next 12 months. Owners and management teams are no strangers to volatility over the past few years, and for those who are looking to prepare their business to take advantage of the opportunities ahead, specialist lenders are on hand to provide the support and funding they need.”
