The Bank of England Monetary Policy Committee met for their second meeting of 2025 this week, voting eight to one to hold rates at 4.5% after lowering rates at the first meeting of the year last month.
The MPC cited continued price pressures, global trade tensions, and economic uncertainty for the decision, but BoE governor Andrew Bailey reiterated that interest rates are on a “gradually declining path”. In reaction, the pound fell 0.3% against the dollar to $1.296, and two-year gilt yield rose to 4.26% from 4.15% earlier in the day. Swap markets slightly lowered their expectations of a rate cut in May from 60% to below 50%, but traders continue to expect two further cuts this year.
The pound fell 0.3% against the dollar to $1.296, and two-year gilt yield rose to 4.26% from 4.15% earlier in the day.
The Federal Reserve also met this week and left interest rates unchanged as it slashed its forecast for growth and increased the outlook for inflation amidst concerns surrounding the tariffs recently implemented by President Trump. Fed chair Jay Powell said that such measures “tend to bring growth down and push inflation up”, slowing the progression on bringing down inflation. Trump used his social media platform Truth Social to continue to pressure the Fed to lower interest rates as he intends to unveil more tariffs next month. The S&P500 rose in immediate reaction to the announcement but lost some of its gains into the closing bell.
UK government borrowing in February overshot expectations as the shortfall between income and spending came in at £10.7bn, way above the forecasted £6.5bn from the Office for Budget Responsibility.
According to official figures released today by the Office for National Statistics, UK government borrowing in February overshot expectations as the shortfall between income and spending came in at £10.7bn, way above the forecasted £6.5bn from the Office for Budget Responsibility. This gap increases the pressure on chancellor Rachel Reeves’s Spring Statement next week, at which she has promised there will be no tax increases, only reductions in government spending to help balance the books.
Our specialist's final thought
"This gap increases the pressure on chancellor Rachel Reeves’s Spring Statement next week, at which she has promised there will be no tax increases, only reductions in government spending to help balance the books."
