by William Schomberg and Suban Abdulla

London (Reuters) – The Bank of England (BOE), as expected, left unchanged its main key rate at 4.50% unchanged on Thursday and warned against anticipations of a drop in the cost of credit during the next meetings, while the Central Bank faces a deep uncertainty that weighs on the British economy and that of the rest of the world.

Stressing the worsening of global trade tensions launched by the United States, the Monetary Policy Committee (MPC) voted Thursday by 8 votes against a status quo on rates after having lowered them by a quarter of a point at its last monetary policy meeting in February.

In the decision rendered this Thursday, only Swati Dhingra spoke in favor of a drop of a quarter of the rate.

The economists interviewed by Reuters mostly planned a vote at 7 against 2 in favor of maintaining the rates at their current level.

“There is a lot of economic uncertainty at the moment,” said Governor Andrew Bailey, quoted in the press release published by the BOE.

According to him, the BOE continues to think that rates are on a progressive decrease trajectory, but it will examine “very closely the evolution of economies in the world and at the national level during each of its rate fixing meetings which take place every six weeks”.

The MPC said he always expects inflationary pressures to continue to diminish, but “there is no presumption that monetary policy will follow a pre-established trajectory during the next meetings,” it is specified.

In the markets, the Sterling book slightly reduced its losses on Thursday after the decision of the Bank of England and appeared around 12:30 p.m. GMT to 1.2951 dollars (-0.39%).

The yield of Gilts, from state bonds to ten years, gave 4.6 basic points, to 4.581%, varying very little compared to their level before the decision of the BOE.

The one at two years fell from 2.2 base points to 4.184% while traders reduced their bets on rate drops this year. Monetary markets are now incorporating 51 basis of rate reduction points by the end of the year, compared to 54 base points before.

The main British stock market index FTSE lost 0.26% at the same time, slightly accentuating its decline after the BOE decision. The index, however, is outperforming other European places.

Uncertainty

The 61 economists interviewed by Reuters before the March meeting of the BOE had all predicted that the main rate of the bank would be maintained at 4.50%, before a possible decrease in May and other discounts in August and November.

The MPC reiterated its February message that it adopts a “gradual and prudent approach” for new rate drops.

He added that uncertainty linked to trade policy in the world had intensified after the United States announced a series of customs duties that caused reprisals on the part of the countries concerned.

The American Federal Reserve (Fed) revised down its forecasts for economic growth on Wednesday for this year, noted its inflation forecasts and indicated that the uncertainty that weighs on the economy had increased, while maintaining its unchanged borrowing costs.

The BOE stressed that “other geopolitical uncertainties had also increased” and took note of the massive investment plans in Germany.

In Great Britain, the imminent increase in social contributions paid by employers is probably behind price increases in the service sector, said MPC, which evokes surveys suggesting a drop in hiring intentions in companies.

The BOE has slightly revised upwards its forecasts concerning the peak of inflation for this year, which it now estimates at 3.75% in the third quarter, a slight increase compared to the February estimate, which was 3.7%.

British inflation having remained firmly above its target of 2% – it reached 3% in January – the BOE reduced borrowing costs to a slower rate than that the European Central Bank (ECB) and the Fed since last summer, which has led to a low rate of growth of British GDP.

However, the BOE has revised upward its estimate of economic growth for the first three months of 2025, bringing it to 0.25% against a previous projection of an increase of 0.1%.

The MPC also monitors the budget updating project by the Minister of Finance, Rachel Reeves, scheduled for next Wednesday, in which it should announce cuts in public spending programs, an important element in the economic growth of Great Britain.

Before the BOE, the Swiss National Bank (BNS) reduced its 25 basis rates in a context of increased risks, while Christine Lagarde, president of BCE, estimated Thursday that inflation in the euro zone could rebound quickly and that a major trade war would weigh on activity.

The central bank of Sweden has chosen to maintain its unchanged rates.

(Report William Schomberg and Suban Abdulla, Claude Chendjou, edited Sophie Louet and Kate Entringer)

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