The Bank of England’s Monetary Policy Committee has held UK interest rates at 4.5%, following February’s cut, in a stance which had been widely predicted. There was an 8-1 split in the MPC’s vote. A key factor in this decision is the recent rise in inflation to 3%, exceeding the Bank’s 2% target. However, with increases to employer NICs and the minimum wage taking effect in April—potentially dampening growth and investment—experts still anticipate further rate cuts later this year.
The Bank has also projected that UK inflation could rise to 3.7% between July and September, driven by rising costs for essentials like water, energy, and transport.
Today, industry experts share their insights on the decision and its implications for advisers and their clients.
Helen Vieira, Head of Banks at Flagstone International said: “The Bank of England’s decision to hold the base rate at 4.5% underscores the persistent economic uncertainty facing the UK. While inflation has eased from its 2022 highs, the recent uptick to 3.0% in January suggests that price pressures remain, reinforcing the need for a cautious approach to monetary policy. With economic growth forecasts subdued and geopolitical uncertainties weighing on global markets, the Monetary Policy Committee appears reluctant to pivot too soon.
“For international cash depositors, a steady base rate provides short-term stability, but with market expectations leaning toward potential rate cuts later in 2025, actively managing cash remains crucial. As central banks across the globe reassess their policy stances, those who remain proactive in reviewing their deposit strategies will be best positioned to optimise returns and mitigate emerging risks in a shifting economic landscape.”
Laith Khalaf, head of investment analysis at AJ Bell, comments: “The Bank’s rate setters have a lot of flux and uncertainty to deal with, so sitting on their hands is probably the best course of action for now. Domestically, April’s National Insurance hike may have implications for inflation, employment and growth, and the shifting global political and economic picture stemming from Donald Trump’s short time in office lends a further element of instability.
“According to Refinitiv data, the market is still pricing in two rate cuts by the end of this year, but clearly the unpredictable economic situation raises risks to that prognosis, in both directions. We now have seven weeks until the next interest rate decision, which right now feels like a yawning gulf for significant developments to pour into.
“The Bank expects inflation to rise towards a peak in the third quarter of this year, so they may want to get an interest rate cut in before it starts to climb to an embarrassing level. A rate cut won’t have its full effect until 12 to 18 months after the decision, but it’s easier to justify loosening policy when CPI inflation is nearer to 3% than 4%.
“The rate-setting committee as a whole became moderately more hawkish this time around, with an 8-1 split in favour or maintaining rates, compared to 7-2 last time. Catherine Mann was the dove who has seen enough to shift from wanting a rate cut to 4.25% to vote for staying the course at 4.5%.
“All of this probably means UK consumers and businesses better get used to rates being at or around this level. As far as we can tell any future rate changes are likely to be in a downward direction, but they will be gradual, barring an economic shock which requires the Bank to step in and stimulate the economy.”
Ed Monk, associate director at Fidelity International, comments: “The Bank of England struck a slightly more hawkish tone in holding rates today, highlighting the need to “pay close attention” to any signs of inflation picking up again. Only one member of the MPC voted for a further cut to 4.25% this month, down from two last month.
“The bond market ahead of today’s decision was predicting rates to fall below 4% by the end of 2025, suggesting two or three more cuts this year, before levelling off through 2026. That would mean households and investors having to get used to rates settling at a meaningfully higher level than has been the case in most of the period since the financial crisis in 2008.
“Our customer data shows clients have been taking advantage of higher cash returns via their investment accounts by investing in cash funds. A cash fund is the best-seller among pension investors this year on the Fidelity Personal Investing platform, and the second best-seller for ISA investors. The prospect of continuing higher rates suggests this trend could continue, although the forecast of inflation climbing to 3.75% this year means a risk that cash returns are eroded in real terms.”
Rob Clarry, Investment strategist at wealth management firm Evelyn Partners, comments: ‘The MPC continues to face a menacing mix of above-target inflation and elevated wage growth on the one hand, versus a soft labour market and weak economic activity on the other.
‘Although this week’s labour market data painted a slightly improving picture, with the number of employees on payrolls rising by 21,000 in February, compared to the consensus expectation for a 21,000 fall. The unemployment rate remained unchanged at 4.4% and available vacancies remained steady at just over 800k. Could this signal that the labour market is now stabilising following recent weakness?
‘GDP contracted 0.1% on the month in January, although UK GDP had risen by 0.1% in 2024 Q4, above the -0.1% rate that had been expected by the Bank of England.
‘The wage data remains a problem, with regular pay growth in the private sector running at 6.1%—too high to be consistent with the Bank’s 2% inflation target. Meanwhile UK CPI has ticked up in recent months as higher food and core goods prices feed through into the headline measure.
‘In this environment the MPC decided to hold the Bank Rate at 4.5%, remaining data dependent. The MPC’s statement reaffirmed that policy will “continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further”.
‘Markets largely took the decision in their stride, with sterling losing some ground on the dollar and gilt yields holding their gains. Looking ahead, traders assign a 66% probability to a cut at the May meeting and expect the Bank Rate to end the year around 4%.
‘Attention now turns to next Wednesday’s Spring Statement when the Chancellor will outline her plans for the UK economy. The Office for Budget Responsibility (OBR) will also publish its UK economic forecast and an update on government borrowing, where it’s expected that c.£10bn headroom has been wiped out amidst higher borrowing costs and weaker economic growth than forecast.
‘Rachel Reeves faces some difficult decisions to meet her “non-negotiable” fiscal rules, with spending cuts or higher taxes required. Reeves will want to avoid more borrowing given substantial debt issuance already in the pipeline. Work and Pensions Secretary Liz Kendall has pre-emptively announced changes to the welfare system which aim to save £5bn by the end of 2030.
‘On the positive side, after a slow start to his premiership, Keir Starmer has made some major policy changes in recent weeks that could shift the growth dial. Higher defence spending, civil service and NHS reform and closer relations with Europe could all support activity growth. While UK appears well-positioned to avoid the worst of Donald Trump’s wrath amidst growing global trade tensions.’
Jonny Black, Chief Client Experience Officer at Aberdeen Adviser, said: “Today’s decision to ‘wait and see’ reflects caution in the current global economic and political environment. Those who think more needs to be done to support economic growth, especially after the surprise contraction in GDP revealed last week, may be disappointed with the result.
“For savers, it’s a good reminder to make sure that their financial plans will deliver for any outcome – whether that’s revisiting the balance of cash or non-cash assets they hold, or simply checking that their saving strategy is still supporting their goals amid economic and market volatility.”
Lindsay James, investment strategist at Quilter said: “In line with its counterpart across the pond, the Bank of England has opted to hold rates at 4.5% at its latest monetary policy meeting. Given the continuing uncertainty faced, particularly with expectations for peak 2025 inflation shifting significantly higher to 3.7%at the previous MPC meeting, the Bank’s decision was taken somewhat out of its hands.
“While energy prices have fallen somewhat since then, there remains very little clarity on President Trump’s tariffs and there is a risk that they could prove to be further inflationary. There had been positive comments around the potential for tariff avoidance when KeirStarmer visited the White House, but the UK has since been hit by steel and aluminium tariffs. VAT also appears to be viewed as a variation of a tariff by the US, which risks a response when reciprocal tariffs are announced on 2nd April, so the outlook remains considerably clouded.
“Wage growth data out this morning will also have done little to quell the Bank’s fears. Regular pay, excluding bonuses, rose by 5.9% between November 2024 and January 2025 – still far above the Bank’s 2% inflation target. Elsewhere, however, the labour market is holding up relatively well and unemployment has remained steady.
“Meanwhile, the economy remains under pressure, evidenced by a surprise 0.1% contraction seen in January. With the economy well and truly flatlining, government spending is being forcibly cut to manage the vanishing fiscal headroom. The Spring Statement is now just a week away, and all eyes will be on the Chancellor as she details just how significant the changes will be, and whether there will be any rabbits pulled from hats.
“Market expectations are currently pricing in around two cuts for the remainder of the year, mirroring expectations for the US. The Bank of England will wish to avoid cutting rates too much too quickly for fear of causing further inflationary pressure, so for now this looks reasonable.”
Andrew Gething, managing director of MorganAsh, said: “Today’s decision was probably one of the easiest to predict given the economic landscape and the central bank’s own gradual and careful approach to monetary policy. In truth, the data just isn’t there yet for the Bank of England to make the decision to cut – although, we remain hopeful that this will still come.
“While stability on interest rates is not necessarily a bad thing, rates remaining high keeps the pressure firmly on those households that are already feeling the pinch. In these moments, the opportunity for clients to find themselves in a vulnerable situation is all too easy and given the wider stakes in play – such as a heavy focus on disability and welfare in next week’s Spring Statement, firms absolutely need to have a real grasp on customer vulnerability.
“The recent multi-firm review by the FCA once again highlighted this is a real issue for firms, with many still unable to monitor or take action on outcomes for vulnerable customers – despite the renewed emphasis of Consumer Duty. As more clients potentially require greater and more tailored support, firms absolutely need the right strategies, training and technology in place to generate the necessary data to respond properly.”
Giles Hutson, CEO, and co-founder of Insignis Cash, commented: “The Bank of England’s decision to hold interest rates at 4.5% comes at a time of extraordinary global economic uncertainty. The impact of President Trump’s trade policies is adding new inflationary pressures, complicating the Bank’s ability to manage monetary policy effectively.
“As policymakers juggle inflation control and economic stability, businesses and individuals must stay agile in their financial planning. For UK savers, this period of uncertainty underscores the importance of strategic cash management. With UK rates still relatively high compared to peers, cash remains an attractive asset class, with ample opportunity to maximise returns on cash holdings.”
“It’s no surprise the Bank of England (BoE) has opted to keep the base rate unchanged after reducing it in February, but it is disappointing,” says Karen Barrett, chief executive and founder of Unbiased, the UK’s leading platform for matching people with financial experts.
“Leaving the base rate at 4.5% is painful for millions still struggling with significantly higher mortgage rates and borrowing costs while household bills continue to grow. Despite the economic uncertainty, positive news is on the horizon as more base rate reductions are expected.“
Simeon Willis, Chief Investment Officer at XPS Group said: “The CPI inflation figures went in the wrong direction since the last rate cut at the start of February, and whilst the Bank has a secondary objective of supporting growth, which is currently fragile, bringing inflation down to target is its primary objective.
Whilst avoiding a rate cut might appear beneficial for pension schemes – given that lower interest rates generally increase liability values- long-dated gilt yields have been somewhat insensitive to the direction of Bank rate recently. Current sky-high gilt yields are being propped up by other factors, such as the pipeline of gilt sales. Long-term inflation expectations have been moderate and declining, and pension schemes are typically well-hedged. This means that for many schemes it’s of the greatest importance for the Bank rate to promote economic growth. This will be important in maintaining the UK’s stability and supporting asset markets like UK corporate bonds, in which pension schemes are heavily invested.
“As such, the constraint that above-target inflation is placing on the speed of interest rate reductions could be seen as undesirable for many pension schemes.”
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown said: “An interest rate hold spells good news for the annuity market. Interest rates are one factor determining rates and this is why we have seen incomes soar in recent years. A 65-year-old with £100,000 can currently get up to £7,585 per year from a single life level annuity according to HL’s annuity search engine. This is close to an all-time high. It’s seen the annuity market step out of the shadows and take centre stage with more retirees looking at whether now is the time to take the plunge and fix a guaranteed income for life.“
David Morrison – Senior Market Analyst at FCA-regulated fintech and financial services provider, Trade Nation, comments: “As expected, the Bank of England have held interest rates at 4.5% by a majority of 8-1, following the previous cut in February. One member did prefer to reduce the Bank Rate to 4.25%, although this was one less than forecast. Sterling rallied on the news while there was a modest pullback in the FTSE 100. There are certainly good reasons why the Bank would consider easing monetary policy. There’s the UK’s dismal growth outlook for a start. Sentiment has soured amongst business leaders as they deal with increased employment costs thanks to the rise in employers’ National Insurance. But inflation remains sticky, and this morning’s employment data showed strong average earnings. All this comes on the back of the uncertainty over what President Trump will announce next on tariffs. But the Bank’s decision to keep rates unchanged came as no surprise, especially given that Chancellor Rachel Reeves will update her budget plans next week.”
