The Bank of England (BoE) has announced it will hold interest rates at their current level of 3.75% in its first base rate vote of the year.

The central bank’s latest decision, widely expected by economists, will keep rates at their lowest level since February 2023.

At its meeting this week, the nine members on the BoE’s Monetary Policy Committee (MPC) voted by a majority of five to four to maintain the base rate, with four members in favour of a 0.25% cut that would have taken rates down to 3.5%.

According to the BoE’s report published today, the MPC is expecting inflation, which currently sits at 3.4%, to fall back to the 2% target from April, owing to “developments in energy prices including from Budget 2025”, it said.

Governor of the BoE, Andrew Bailey, said: “We now think that inflation will fall back to around 2% by the spring. That’s good news. We need to make sure that inflation stays there, so we’ve held rates unchanged at 3.75% today.

“All going well, there should be scope for some further reduction in bank rate this year”.

The final vote of 2025 had seen the MPC announce a 0.25% cut to rates in December, the sixth time the central bank had cut interest rates since it started its cutting cycle in August 2025 from a peak of 5.25%.

Chief investment strategist at Wealth Club, Susannah Streeter, commented that the decision this week to hold rates, at a vote of five to four, was “a closer call than expected”.

“It puts a cut in March still very much in the picture,” she added. “The labour market is showing weakness, Budget changes are set to bring down energy and transport costs and a wave of cheaper Chinese goods are heading this way. So, more policymakers could well be swayed to vote for lower borrowing costs next month.

“But these are volatile times, with the overall outlook in a state of flux, given ongoing geopolitical tensions, erratic US trade policy, and a tech sell off roiling markets. So, the Bank’s decision makers will still want more clarity on what could be ahead, before tinkering with borrowing costs again.”

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