UK Holds Base Interest Rate at 4.75%... "Gradual Approach to Rate Cuts"

The Bank of England (BOE), the central bank of the United Kingdom, kept its benchmark interest rate unchanged at 4.75% per annum at its monetary policy meeting on the 19th (local time).

According to Bloomberg and other sources, at the meeting, 6 out of 9 BOE members voted to keep the rate unchanged. Three members voted for a 0.25 percentage point cut, citing weakening demand and labor market conditions.

Reuters Yonhap News

Andrew Bailey, Governor of the BOE, stated, "We must remain confident in consistently meeting the 2% inflation target," adding, "I still believe a gradual approach to future rate cuts is appropriate. However, due to increased economic uncertainty, I cannot commit to when or by how much rates will be cut next year."

With the UK Consumer Price Index (CPI) inflation rate announced the previous day exceeding the BOE's 2% target, many in the market expected the benchmark rate to be held steady. Governor Bailey had previously indicated a cautious approach to rate cuts to maintain inflation close to the target last month.

Pressure on UK public finances and economic uncertainty stemming from the return of Donald Trump as U.S. President also added weight to the decision to keep rates unchanged.

The BOE stated, "The committee discussed risks to global growth and inflation arising from geopolitical tensions and trade policy uncertainties," adding, "The incoming U.S. administration has proposed tariff increases in ways that could affect global trade, which may directly or indirectly impact the UK economy."

However, some market participants interpreted the fact that 3 out of 9 members voted for a cut and Governor Bailey's remarks as indicating a dovish stance by the BOE. Earlier, Reuters surveyed economists who mostly expected only one member to vote for a cut.

The BOE cut rates twice this year, by 0.25 percentage points each in August and November.

The day before, the U.S. Federal Reserve (Fed) held a Federal Open Market Committee (FOMC) meeting and lowered the benchmark rate by 0.25 percentage points to 4.25?4.50%. However, Fed Chair Jerome Powell maintained a cautious tone regarding the rate path for next year.