Bank of England and ECB Hold Interest Rates Following the Federal Reserve

Both the Bank of England and the European Central Bank (ECB) held interest rates today.

• The Bank of England by a narrow majority of 5:4, held rates at 3.75% pa after last month’s cut.
• The ECB held rates at 2.0% pa for a fifth consecutive month.

EU inflation was just 1.7% pa in January, so below but close to its 2.0% target, so a rate cut change was unexpected.

For different reasons, in the UK a rate cut was not expected as we are still fighting inflation but inflation will likely fall for January/February giving some hopes for a rate cut next month.

Comment

The decision to hold is not surprising.  A stronger £ due to higher rates, will make imports cheaper, this pushing inflation down.  That said, it is close (as was the vote) in that a stronger £ means UK exports are more expensive, keeping economic growth back.

Europe is in a tougher position, some economies are stalling economically and a low rate of 2.0% will keep the € relatively weak, meaning exports are cheaper.

Key Dates

• Next Bank of England rate decision 19 March 2026
• Next ECB rate decision also on 19 March 2026.