Economists are widely expecting the Bank of England to keep interest rates unchanged at 3.75% when the Monetary Policy Committee meets this week. The decision, due on Thursday, is being described as highly likely, with most forecasts pointing towards another hold rather than any immediate change in policy.
If confirmed, the outcome would be a setback for borrowers hoping for relief on mortgages, loans, and other forms of debt. At the same time, it could provide some benefit for savers, as higher interest rates on savings accounts are likely to remain in place for longer than previously expected.
The Monetary Policy Committee, which is made up of nine members, is expected to maintain its current position despite ongoing economic uncertainty. One of the key factors influencing this decision is continued pressure on global energy markets, particularly following recent geopolitical tensions involving US-Israeli and Iranian relations. These developments have contributed to rising costs since late February, especially in relation to fuel and shipping.
Recent inflation data highlights the scale of the challenge facing policymakers. Official figures show that UK inflation increased to 3.3% in March, marking a three-month high. This rise was largely driven by higher energy costs, with fuel prices playing a significant role in pushing inflation upwards.
Motor fuel prices saw a particularly sharp increase, rising by 8.7% in just one month. This was the steepest monthly jump recorded since mid-2022 and reflects ongoing disruption to global oil supply chains. Concerns around shipping routes and production levels have added further pressure, leading to higher costs at the pump for both petrol and diesel.
There are also signs that inflationary pressures could continue to spread more broadly through the economy. Research from the Bank of England suggests that businesses now expect food price inflation could reach as high as 7% over the next year. This indicates that households may continue to face higher living costs across a range of essential goods.
Despite these inflation concerns, recent economic data has shown more resilience than expected. Figures released by the Office for National Statistics show that the UK economy grew by 0.5% in February, significantly ahead of the 0.1% growth that economists had forecast. This stronger-than-expected performance suggests the economy is holding up better than previously thought, even under pressure.
The Bank of England is also set to publish its latest monetary policy report alongside this week’s decision. This will include updated economic forecasts and will be the first full assessment since recent geopolitical tensions began affecting energy markets more significantly.
Most economists believe the central bank is likely to remain cautious for now. The combination of persistent inflation and relatively strong economic activity gives policymakers little immediate reason to cut interest rates. Instead, the focus appears to be on waiting for clearer signals before making any adjustments.
Thomas Pugh, chief economist at RSM UK, has described the expected outcome as almost certain, suggesting that the committee is likely to vote unanimously in favour of holding rates steady. He pointed to ongoing uncertainty around global energy prices as a key reason for the Bank’s cautious approach.
He also noted that there is value in waiting for more data before making any policy changes. With inflation still influenced heavily by external factors such as energy markets, the Bank is expected to avoid making premature moves until there is greater clarity on the outlook.
Andrew Goodwin, chief UK economist at Oxford Economics, has also suggested that most members of the committee appear comfortable keeping rates at their current restrictive level. This allows them to continue monitoring how recent price shocks are filtering through into the wider economy.
However, despite expectations of a hold this week, there is still debate about what may happen later in the year. Some economists warn that interest rates could rise again if inflation proves more persistent than expected.
Stronger-than-expected economic data has added to this uncertainty. Recent growth figures suggest the UK economy may be more resilient than anticipated, which could reduce the urgency for rate cuts and potentially increase the risk of further tightening later on.
Some forecasts suggest that if inflation remains elevated, the Bank could be forced to consider raising rates during the summer. Others believe the current level of uncertainty, particularly around energy prices, may delay any major decisions until later in the year.
Pantheon Macroeconomics has suggested that there could be one further rate rise this year, potentially in June, followed by cuts in later years once inflation begins to ease more consistently. This highlights the range of possible outcomes still on the table.
For consumers, the immediate impact of a rate hold is likely to be mixed. Borrowers will continue to face higher repayment costs on mortgages and loans, particularly those on variable or tracker rates. There is little expectation of short-term relief in borrowing costs.
On the other hand, savers may benefit from the continued higher rate environment. With banks still competing for deposits, savings products are likely to remain relatively attractive compared with recent years, particularly fixed-term and bonus-rate accounts.
Savings expert Katie Horne noted that if the base rate remains unchanged, competition among banks for customer deposits is likely to stay strong. This could help support better returns for savers, at least in the short term.
She also pointed out that banks typically begin reducing savings offers later in the year, meaning current conditions may represent a more favourable period for those looking to lock in higher rates.
Overall, the expected decision from the Bank of England reflects a cautious balancing act. Policymakers are trying to manage persistent inflation pressures while also supporting a still-resilient economy.
At present, there is no clear signal of an imminent shift in direction. Instead, the focus remains on monitoring how global energy markets, inflation trends, and domestic growth data evolve over the coming months.
For now, both borrowers and savers are likely to experience a period of relative stability. However, with economic conditions still uncertain, future interest rate decisions could change quickly depending on how inflation develops.
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