The Bank of England (BoE) will be making its next monetary policy move on Thursday with analysts expecting it to hold its interest rates at 4.5%. The bank has been acting in what it described as a "careful" and "gradual" manner. Its first interest rate cut since 2020 came last year, in August. Since then, the BoE has been alternately switching between holding the rates and lowering them.
The latest consumer inflation reading in the country surprised to the upside, with the annual figure clocking in at 3% in January, up from December's 2.5%. In light of the United States changing trade policy, BoE's Monetary Policy Committee member Swati Dhingra warned that higher tariffs and trade fragmentation could lead to an uptick in UK inflation. While BoE Governor Andrew Bailey also mentioned that the bank sees some growth in inflation in the upcoming months, he stressed that "it's nothing like we saw a few years ago."
Nonetheless, the country's economic outlook remains uncertain. January data recently showed that the UK's gross domestic product surprisingly contracted, with production and construction sectors being the main contributors to the fall. With all the precariousness present on the global stage, the BoE is likely to continue with its cautious policy approach in the months to come.
