Bank holds interest rate and warns of budget fallout and global trade wars

The Bank of England has kept interest rates on hold as it warned UK growth is on the brink of stagnation amid the fallout from Rachel Reeves's budget and the threat of Donald Trump reigniting global trade wars.

- Richard Partington

Reflecting heightened concerns over stubborn inflation, the central bank's rate-setting monetary policy committee (MPC) voted by a majority of six to three to leave interest rates unchanged at 4.75%, prolonging the pressure on households and businesses from elevated borrowing costs.

Threadneedle Street also issued a sharp downgrade in its forecasts for the British economy, predicting zero growth in the final three months of the year. It had said it expected growth of 0.3% as recently as November.

Highlighting the chancellor's £40bn tax-raising budget, alongside rising geopolitical tensions and trade policy uncertainty after Trump's election victory, the MPC said growth was faltering while inflation risks remained.

"These developments have generated additional uncertainties around the economic outlook," it added.

Some economists suggested the six-three split was a sign that the Bank was preparing to lower borrowing costs at its next policy meeting in February, after Dave Ramsden, a deputy governor, joined the external MPC members Swati Dhingra and Alan Taylor in pushing for an immediate 0.25 point reduction.