Bank of England Holds Rates Amid Inflation Concerns

So the Bank of England kept rates on hold at 4.5% at their March meeting, and that's largely due to the fact that both inflation and wage growth, whilst easing, are still running at rates that are too high relative to the 2% inflation target. And of course, the March decision is happening against a backdrop of really unusually high uncertainty, both here at home in terms of the fiscal outlook, as well as, of course, globally.

We saw today's decision, whilst expected, as being a little bit tilted towards the hawkish side. Firstly, we only had one dissenter, only one monetary policy committee member voting for a cut, whereas I think consensus was expecting at least two MPC members voting for a cut. Secondly, the statement had a lot of emphasis around inflation concerns.

Firstly, they noted that some of the recent increase in inflation could well be driven by domestic factors. And moreover, there are concerns around how persistent some of these domestic inflationary factors could be. That said, overall, we do think that UK rates are on a downward trajectory over the course of 2025. We expect four more cuts over the course of this year, bringing rates below 4%, ending the year at 3.5%.