The Bank of England has warned that economic and global trade uncertainty is intensifying, as it decided to keep UK interest rates unchanged at 4.5%.
The decision, which was widely expected, comes amid rising tensions in international trade. The Bank pointed to US trade tariffs and retaliatory measures from the EU as key factors contributing to uncertainty for economies worldwide.
Despite maintaining the current rate, Bank of England Governor Andrew Bailey reassured that interest rates remain on a “gradually declining path.” However, he acknowledged the challenges ahead, stating: “There’s a lot of economic uncertainty at the moment. We’ll be watching very closely at how the global and domestic economies evolve.”
Bailey also emphasized that the Bank’s primary goal is to ensure inflation remains low and stable. While inflation has fallen to 3%, it is still above the Bank’s 2% target.
Monetary Policy Committee Decision
The Monetary Policy Committee (MPC), which determines interest rates, voted 8-1 in favor of keeping the base rate at 4.5%.
The base interest rate directly influences the borrowing costs set by High Street banks and lenders. While higher rates have led to increased borrowing costs for mortgages and credit cards, they have also benefited savers with better returns.
The latest decision means that about 600,000 homeowners with tracker mortgages—which move in line with the Bank’s rate—will see no immediate change in their monthly repayments.
However, the vast majority of mortgage holders—more than 80%—are on fixed-rate deals. This means they will only feel the impact when their current deals expire, potentially facing higher repayment costs.
As of Thursday, the average mortgage rates stood at 5.33% for a two-year fixed deal and 5.18% for a five-year fixed deal.
Despite rates remaining steady for now, mortgage rates have gradually declined in recent weeks. This is largely due to market expectations that the Bank will introduce further rate cuts later this year. Analysts predict that at least two rate reductions could take place by the end of 2025.
While economic uncertainty remains high, the Bank of England is carefully monitoring the situation, balancing inflation control with the need to support economic stability and growth.
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