Bank of England Set to Sit Tight on Rates as Uncertainty Mounts

• The Bank of England looks set to keep interest rates on hold on Thursday as it awaits the impact on the economy of U.S. President Donald Trump's trade tariff onslaught and of the British government's imminent tax hike for employers.
• With UK inflation stuck firmly above its 2.0% target, the BoE has cut borrowing costs by less than the European Central Bank and the U.S. Federal Reserve since last summer, contributing to the country's sluggish growth rate.
• When it trimmed its benchmark Bank Rate to 4.5% in February, the BoE stressed it would move gradually and carefully with further cuts given the uncertainties hanging over the economy.
• Since then, those uncertainties have only mounted in large part due to Trump gearing up to announce import tariffs for a host of trading partners of the United States on April 2, muddying the outlook for growth and inflation around the world.
• Also on the Monetary Policy Committee's radar is finance minister Rachel Reeves' budget update speech next Wednesday in which she is expected to announce cuts to public spending plans, a big component of Britain's economic growth outlook.
• Last month the BoE said it expected inflation to reach 3.7% later this year, up from January's 3%. Some economists say it will hit 4%, testing the BoE's assumption that there is little threat to longer-term price pressures through wage demands.

(Source: Reuters)