Bank of England Holds at 3.75% as External Economists Push for Immediate Easing

The Bank of England has maintained interest rates at 3.75%, though external economists on the monetary policy committee advocated for immediate cuts. Alan Taylor and Swati Dhingra, both independent members, joined two senior Bank officials in voting for a quarter-point reduction.
The 5-4 split in the committee’s vote highlights the diversity of views among policymakers about the appropriate pace of easing. The two external economists supporting a cut were joined by senior Bank insiders Dave Ramsden and Sarah Breeden, creating a substantial minority in favor of more aggressive action. This division comes after six rate cuts since mid-2024 and suggests further easing is likely.
Governor Andrew Bailey, who voted with the majority to hold rates, focused on the inflation outlook in his explanation. He projected that inflation would return to around 2% by spring, which represents positive progress toward the target. Bailey indicated that while current policy settings are appropriate to ensure inflation stays low, there should be room for additional rate cuts later in the year.
Alan Taylor, one of the external economists, went further than simply voting for a cut. In the meeting minutes, he suggested that a base rate of 3% should now be “in our sights,” implying three additional quarter-point reductions are warranted. He pointed to what he described as “continued drift” in the Bank’s forecasts toward weaker growth and lower inflation as justification for this view.
Economic projections show GDP growth of just 0.9% this year, down from 1.2% previously, while unemployment is expected to reach 5.3%. Meanwhile, Chancellor Rachel Reeves’s budget measures, including utility bill cuts and rail fare freezes from April, are projected to drive inflation down to 2.1% by mid-2026, compared to 3.4% in December. This dramatic improvement supports the case made by Taylor and other dovish committee members for more aggressive rate cuts.