The Bank of England is expected to hold interest rates steady when it announces its latest interest rate decision on Thursday. The last time the Bank of England's Monetary Policy Committee (MPC) met in February, it lowered interest rates from 4.75% to 4.5%.
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03-20, 2025Bank interest rates have a significant impact on the borrowing costs for households, businesses, and governments, as well as the returns for savers. While no change is expected in the announcement at 12:00 GMT, many analysts are predicting two more rate cuts before the end of the year. The market will be closely watching the voting patterns of the committee members.
The Monetary Policy Committee is composed of five women and four men, including economists and key figures from the Bank of England, and is chaired by the Governor of the Bank of England, Andrew Bailey. The committee meets eight times a year, and its decisions have a wide-ranging impact on everything from mortgage costs to the ability of businesses to invest.
The committee's primary goal is to use interest rates to ensure that the inflation rate (the annual rate of price increases) reaches the government's target of 2%. The latest calculations show that inflation rose to 3% in January, which is one of the reasons commentators expect interest rates to remain unchanged this time. Lowering interest rates could stimulate more consumer spending and push up inflation.
Paul Heywood, Chief Data and Analytics Officer at Equifax UK, said: "Bank of England decision-makers have been warning about inflation and persistent uncertainty, so further interest rate relief is unlikely for homeowners from this month's meeting." Mortgage rates have been slowly declining, mainly because markets and lenders expect further bank rate cuts later in the year.
The Monetary Policy Committee has cut interest rates three times since August 2024, bringing them to their lowest level in 18 months. However, the Bank of England has also stated that it will take a "gradual and cautious" approach to further interest rate reductions. Lower interest rates may also mean lower borrowing costs for loans and credit cards, but also lower returns on savings. These decisions will be driven by the outlook for the UK economy.
Following the February Monetary Policy Committee meeting, the Bank of England halved its economic growth forecast for this year, although it raised its forecasts for 2026 and 2027. It said it expects the UK economy to grow by 0.75% in 2025, down from its previous estimate of 1.5%. At the same time, it said it expects inflation to rise to 3.7% and not fall back to the 2% target until the end of 2027.
In addition to these forecasts, there is uncertainty surrounding domestic and global economic policies. Chancellor of the Exchequer Rachel Reeves will deliver her Spring Statement next week, which is unlikely to include major policy announcements but will include the official forecasting body – the Office for Budget Responsibility's – view of the UK's economic trajectory. It will also include some details of government department spending allowances.
It is widely believed that the UK economy is underperforming, and global factors such as US trade tariffs are having an indirect impact on the UK.
