The Bank of England has held interest rates at 4.5 per cent as worries over a global trade war flare up. 

Rate-setter Swati Dhingra, an external member on the Monetary Policy Committee (MPC), was the lone wolf who voted for a 25 basis point cut. 

The decision saw Catherine Mann split from Dhingra after the pair voted for a radical 50 basis point cut in February. 

Pessimism over UK growth continued as President Donald Trump’s sweeping tariffs, including on steel and aluminium, has put the Bank’s economists on edge. 

It also stuck by its February prediction that inflation could hit a peak of 3.75 per cent this year. 

“There’s a lot of economic uncertainty at the moment,” said Andrew Bailey, the central bank’s governor.

While the bank had held rates at 4.5 per cent, he added: “we still think that interest rates are on a gradually declining path.”

Chancellor Rachel Reeves said the government had “work to do” to ease inflation.

“I’m fighting every day to put more money in the pockets of working people to deliver our Plan for Change,” she said.

Many City analysts had expected the Bank of England to hold its interest rates, with economists and business leaders believing that a cut in May was more likely.

“We’ll be looking very closely at how the global and domestic economies are evolving at each of our six-weekly rate-setting meetings,” Bailey said. “Whatever happens, it’s our job to make sure that inflation stays low and stable.”

Inflation creeping up

Inflation hit three per cent in January, with figures for price rises in February set to be released next Wednesday ahead of Chancellor Rachel Reeves Spring Statement.

Office for National Statistics (ONS) figures released this morning delivered an ominous warning to forecasters measuring inflation. 

Wage growth of 5.9 per cent between November 2024 and January 2025 was likely to exacerbate inflation.