The Bank of England is expected to hold the base interest rate at 4.25% this week after voting narrowly for a cut last month.

Uncertainty created by US President Donald Trump’s tariffs and a surge in the latest inflation figure, make a cut less likely when the latest decision is announced on Thursday.

There appears to be more caution in the Bank’s approach than earlier this year when several cuts were expected.

Uncertainty

Bank Governor Andrew Bailey (main picture) said this month: “I think the path [for interest rates] remains downwards, but how far and how quickly is now shrouded in a lot more uncertainty.”

The Bank cut the base interest rate by 0.25% in May as expected in what was a welcome shot in the arm to the property market.

But it was a close vote at the Monetary Policy Committee meeting with a 5-4 majority in favour of a reduction.

Inflation surge

Inflation surged to 3.5% in April, its highest level for 15 months. The rise was largely driven by increases in household energy bills, water costs, council tax, airfares and services inflation.

Sarah Coles, Head of Personal Finance at financial services firm Hargreaves Lansdown, says: “If inflation figures don’t hold any surprises, interest rates are held, and expectations stick for two more cuts this year, we could well see rates fall again.”

Growth fall

The latest growth figures showed a 0.3% fall in April, which was a setback after the economy grew in previous months.

Paul Dales, Chief UK Economist at Capital Economics, says that the latest economic growth data “won’t prompt the Bank of England to cut interest rates next Thursday. But it is one more piece of news pointing to another cut in August”.