THE BANK OF ENGLAND on Thursday cut its forecasts for UK economic growth this year and next, while keeping its benchmark interest rate unchanged at 3.75 per cent.
The central bank now expects gross domestic product growth of 0.9 per cent this year and 1.5 per cent in 2027. It had previously forecast GDP output of 1.25 per cent for 2026 and 1.6 per cent for next year.
BoE governor Andrew Bailey said inflation was expected to fall to around the bank’s two per cent target in April, helped by easing energy bills.
“We need to make sure that inflation stays there, so we’ve held rates unchanged,” Bailey said.
UK annual inflation remains elevated at 3.4 per cent, according to the latest official data, while unemployment stands at a nearly five-year high of 5.1 per cent.
Policymakers, including Bailey, voted 5–4 to keep the benchmark rate on hold, with the dissenters seeking a 0.25 percentage point cut.
“All going well, there should be scope for some further reduction in Bank Rate this year,” Bailey said.
The decision came as the European Central Bank prepared to maintain eurozone borrowing costs for a fifth straight meeting on Thursday. That followed the US Federal Reserve last week holding interest rates steady, citing robust economic growth.
Official figures show that wage growth in Britain has slowed in the private sector but remains elevated in the public sector.
The BoE cut its interest rate by a quarter-point to 3.75 per cent at its previous policy meeting in December. It was the sixth reduction since the central bank began a trimming cycle in August 2024, one month after Britain’s Labour party won a general election.
A cut to the interest rate can help individuals and businesses taking out loans, but it reduces returns on savings deposited in banks.
Britain’s retail banks tend to pass on BoE rate cuts to their customers, easing the cost of mortgages and business loans.
