Bank of England Maintains Interest Rates Amid Dovish Stance

The Bank of England has decided to keep interest rates unchanged at 3.75% by a narrow vote of 5-4, with Governor Andrew Bailey casting the decisive vote. According to Jin10, Bailey opted for stability this month, contrasting his previous support for a rate cut in December. In his statement, Bailey indicated that there might be room for further rate cuts this year if conditions allow. The Monetary Policy Committee's decision reflects a more dovish stance than the market had anticipated. The central bank's forecasts suggest that inflation will return to the 2% target by April and remain below this level for most of 2027. The meeting minutes highlighted signs of "sluggish economic growth and increased labor market slack," with the upward risks to inflation "no longer as pronounced." Four dovish members, Dingra, Taylor, Ramsden, and Briden, voted in favor of a rate cut, surprising the market, which had expected only two to three members to support further easing. The latest economic forecasts show a significant downgrade in this year's growth rate to 0.9% from the previous 1.2%. The growth forecast for 2027 has also been revised down from 1.6% to 1.5%, while the economy is expected to grow by 1.9% in 2028, slightly above the previous prediction of 1.8%.