British interest rates are set to remain at 4.5%, with another cut to borrow costs unlikely, while the Bank of England is assessing increasing global uncertainty, experts say.
The Bank of England’s Monetary Policy Committee (MPC) is expected to keep the interest rate on Thursday.
MPC has gradually cut down on borrowing costs since August, which facilitates the pressure on some borrowers who have been able to offer lower priority rates.
This has been possible, while the speed of British inflation has steadily decreased from the highs reached in 2023 at the top of the cost of living.
But the bank’s governor Andrew Bailey has been eager to emphasize that the committee wants to take a “gradual and careful approach” to reduce rates while monitoring changes in Britain and the global economy.
Consumer Prices Index (CPI) Inflation rose to 3% in January, when the privilege was mainly driven by energy prices, water bills and bus prices.
At the same time, the British economy has angry on the edge of a decline – with gross domestic product (GDP) increased by 0.1% over the last three months of the year, but contracted by 0.1% in January.
Britain’s economic forecast was cut this week by the Organization of Economic Cooperation and Development (OECD), which warned that “further fragmentation of the global economy” was a significant concern in the midst of merchant stresses caused by US President Donald Trump.
This would probably increase inflation around the world and have an impact on living standards, the OECD warned.
Robert Wood and Elliott Jordan-Doak, economists at the Pantheon Macroeconomics, said MPC will “consider us President Trump’s actions”, which have “run a stock market sale and skyrocketing uncertainty” and therefore fuel for concern about global economic growth.
But they added that MPC is “equally unable to predict Mr. Trump’s next move”.
Last month, the committee insisted that it is not yet known how tariffs – which have been placed in China, Canada and Mexico – will affect the British economy.
Pantheon economists predict that interest rates will be held on wait this month – but that two cuts will be added in May and November this year.
Sanjay Raja, senior economist for Deutsche Bank, said “the path in front will be a careful calibration” for MPC and added: “uncertainty remains elevated.”
He said that MPC will “very likely remain nervous about the jump higher in the heading inflation – especially given the fact that the increase in momentum has been driven by more prominent objects in the CPI curve” such as food and energy.
“Given the broad consensus of a ‘careful’ approach to removing policy restriction, we expect MPC to have no urgency of reducing the rates on March 20,” he added.