UK interest rates held at 4.5% as Bank warns over US tariff uncertainty

The Bank of England has kept UK interest rates at 4.5%, as policymakers warned that uncertainty over global trade had intensified following new US tariffs.

Eight members of the Bank’s nine-person Monetary Policy Committee (MPC) voted to keep rates on hold on Thursday while they assess the impact of economic and political developments around the world.

“Since the MPC’s previous meeting, global trade policy uncertainty has intensified, and the United States has made a range of tariff announcements, to which some governments have responded,” the committee said in a summary of its latest decision.

This has seen US President Donald Trump impose tariffs on UK steel and aluminium imports, as well as on Canada, China and Mexico.

The MPC said there were risks to the economic outlook for several countries, including the UK, and uncertainties about how the policy changes could affect inflation.

It stressed it was a “rapidly evolving situation, which it would monitor closely and assess further” at the next meeting in May.

The Bank uses interest rates as a tool to control inflation, targeting a Consumer Prices Index (CPI) inflation rate of 2%.

CPI inflation rose to 3% in January, according to the latest official figures, which the MPC said was higher than it had been expecting and that it needed to pay close attention to any signs of lasting inflationary pressures.

Andrew Bailey, governor of the Bank of England, said: “There’s a lot of uncertainty at the moment.

“We still think that interest rates are on a gradually declining path, but we’ve held them at 4.5% today.”

He stressed that the committee will be “looking very closely at how the global and domestic economies are evolving” every time it meets.

The MPC’s decision comes a day after the US’s Federal Reserve opted to keep its base interest rate on hold, warning that tariffs had increased uncertainty over the economic outlook.

The policymakers also cut the outlook for US economic growth and raised projections for price rises.

Meanwhile, the Bank said it weighed up developments in the UK jobs market following the Government’s autumn budget, which laid out plans to raise taxes for some businesses.

More firms were reporting hiring pauses or freezes, and they planned to review staffing levels through natural attrition or redundancies if the outlook did not improve, the Bank found.

At the same time, the outlook for economic growth had improved slightly since the MPC’s last meeting in February.

Published: 20/03/2025 by Radio NewsHub