United Kingdom Interest Rate

The Bank of England kept its Bank Rate unchanged at 3.75% in February, with a narrow 5 to 4 vote, as policymakers balanced easing inflation pressures against risks from a weakening economy. Four members supported a 25 basis point cut, highlighting growing divisions within the Monetary Policy Committee. Inflation remains above the 2% target but is expected to fall back to around that level from April due partly to energy price developments. Pay growth and services inflation have continued to ease, reflecting subdued economic growth and rising slack in the labour market. Policymakers noted that risks of persistent inflation have diminished, while weaker demand and a softening jobs market pose downside risks. Bank Rate has already been reduced by 150 basis points since August 2024, lowering policy restrictiveness. The committee signalled that further rate cuts are likely but will depend on incoming inflation data, with future decisions expected to be finely balanced.