UK Holds Base Interest Rate Steady at 4.5%

The Bank of England (BOE), the central bank of the United Kingdom, kept the base interest rate unchanged at 4.50% on the 20th (local time).

A view of the Bank of England located in the City of London, the financial center of London. Photo by Yonhap News

Eight members of the Monetary Policy Committee (MPC) voted to keep the rate unchanged, while one member voted for a 0.25 percentage point cut. Previously, the market had expected a 7 to 2 vote in favor of holding the rate steady.

Andrew Bailey, Governor of the BOE, stated in a release, "There is currently a lot of economic uncertainty." He added, "The MPC still views the interest rate as being on a gradual downward path," but also said, "At the MPC meetings held every six weeks, we will closely monitor how the global and domestic economies are progressing."

The MPC statement also noted, "Since the last MPC meeting, uncertainty around global trade policy has intensified," referring to the U.S. tariff announcements and the responses from trading partners. It further stated, "Other geopolitical uncertainties have also increased, and volatility indicators in financial markets have risen globally," and mentioned, "The German government has announced plans for a significant overhaul of fiscal rules."

The 4.50% base rate is the lowest level since June 2023. The BOE has cut the base rate three times since mid-last year. Previously, the rate had risen to a 16-year high of 5.25%, before being lowered by 0.25 percentage points in August and November of last year, and again in February of this year.

The UK economy is slowing in growth, but inflation has not stabilized at the BOE’s policy target of 2%. Inflation in January this year reached 3% annually, the highest in 10 months. Market experts predict that inflation could rise further due to the tariff war originating from the U.S. The BOE announced last month that it expects inflation to rise to 3.7% by the end of this year.