LONDON, March 20 (Xinhua) -- Britain's central bank, the Bank of England (BoE), has kept its benchmark interest rate unchanged at 4.5 percent, warning that "global trade policy uncertainty has intensified."
At its meeting concluding on Wednesday, the BoE's Monetary Policy Committee voted by a majority of eight to one to maintain the rate, with one member favoring a 0.25 percentage point cut to 4.25 percent, according to a statement released on Thursday.
Since February, geopolitical and global trade policy uncertainty has increased further, and it is likely that this elevated uncertainty will persist, the BoE noted in its statement.
"The United States has made a range of tariff announcements, to which some governments have responded. Other geopolitical uncertainties have also increased and indicators of financial market volatility have risen globally," said the Bank.
The overall impact of these tariff policies on the United Kingdom's inflation remains unclear at present, depending on how trade policies in other countries evolve and how these changes transmit through different economic channels, including exchange rates, the Bank added.
Andrew Bailey, governor of the BoE, stressed that policymakers will be "looking very closely at how the global and domestic economies are evolving at each of our six-weekly rate-setting meetings."
In the coming months, the BoE will need to carefully navigate the challenge of balancing a sluggish economy with the risk of inflation resurfacing.
In the statement, the BoE noted that 12-month consumer price inflation (CPI) rose to 3.0 percent in January from 2.5 percent in last December, moving further away from the Bank's 2-percent target. The Bank now expects CPI to rise to around 3.75 percent in the third quarter of 2025 before falling back thereafter.
Regarding economic growth, the central bank projects gross domestic product (GDP) growth of 0.25 percent in the first quarter of 2025, up from its previous forecast of 0.1 percent in February. However, the latest data showed that the economy contracted by 0.1 percent in January, signaling a weak start to the year.
"Like other central banks, the BoE is concerned about rising global uncertainty. Tariff policies under Trump and increasing trade tensions could pose a particular challenge for the UK. As a major importer, higher trade costs could push inflation higher, while at the same time, slower growth in the Eurozone will also weigh on the UK outlook," Modupe Adegbembo, an economist at investment firm Jefferies, told The Guardian.
In February, the BoE lowered the interest rate from 4.75 percent to 4.5 percent as inflationary pressures eased across Britain.
Analysts now predict two more rate cuts by the end of the year. However, the next cut may not come in the May rate-setting meeting as previously expected due to the BoE's slightly more "hawkish" stance on Thursday. S&P Global Market Intelligence forecasts the next rate cut in August, followed by another in November, bringing the rate down to 4.0 percent by December.
