FX.co ★ Bank of England Keeps Rates Steady

In February, the Bank of England maintained its Bank Rate at 3.75%, following a close 5 to 4 vote among policymakers who carefully weighed the decreasing inflation pressures against threats from a faltering economy. Notably, four members were in favor of a 25 basis point reduction, spotlighting increasing divergences within the Monetary Policy Committee. While inflation remains above the 2% target, it is anticipated to realign closer to that mark come April, partly influenced by changes in energy pricing. Wage growth and inflation in services have shown signs of moderation, indicating tepid economic expansion and an increase in slack within the labor market. Policymakers observed a reduction in the risk of persistent inflation; however, the potential for diminished demand and a weakening employment market presents downward risks. Since August 2024, the Bank Rate has been lowered by 150 basis points, diminishing the restraining effect of current policies. The committee indicated that further rate reductions are probable, though they will be contingent on forthcoming inflation data, with forthcoming decisions expected to require careful deliberation.