LONDON (AP) — The Bank of England kept its main interest rate unchanged at 3.75% on Thursday with U.K. inflation remaining above target and economic growth is showing signs of picking up.
The decision was widely anticipated in financial markets but the split on the nine-member rate-setting panel was much closer than expected. Five members of the Monetary Policy Committee opted to keep rates unchanged while four voted for a quarter-point cut.
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People walk in front of the Bank of England, at the financial district in London, Thursday, Feb. 5, 2026 as the Bank of England holding its first interest rate meeting in 2026 at a time when inflation in the UK remains above target and economic growth is stubbornly low. (AP Photo/Kin Cheung)
A man walks in front of the Bank of England, at the financial district in London, Thursday, Feb. 5, 2026 as the Bank of England holding its first interest rate meeting in 2026 at a time when inflation in the UK remains above target and economic growth is stubbornly low. (AP Photo/Kin Cheung)
A man walks in front of the Bank of England, at the financial district in London, Thursday, Feb. 5, 2026 as the Bank of England holding its first interest rate meeting in 2026 at a time when inflation in the UK remains above target and economic growth is stubbornly low. (AP Photo/Kin Cheung)
FILE - Pedestrians pass the Bank of England in London, on Dec. 18, 2025. (AP Photo/Kirsty Wigglesworth, File)
The central bank, which sets interest rates for the whole of the U.K., has been steadily reducing interest rates over the past 18 months, more often than not every three months. It last cut its key rate in December and indicated that further reductions are likely this year.
Economic forecasts accompanying the decision reinforced the view that further rate cuts are in the offing, as the bank is predicting that inflation will fall back to its 2% target in the coming months from 3.4% currently.
That's around a year earlier than previously thought. It said a series of measures to reduce the cost of living, particularly with regard to energy bills, that were announced in November's annual budget by Treasury chief Rachel Reeves were largely behind the faster drop.
“We now think that inflation will fall back to around 2% by the spring," said Bank Governor Andrew Bailey. “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.”
Britain’s Labour government, which has lost significant support since it won the general election in 2024 partly because of the economy, is counting on inflation falling sharply this year, which would allow the central bank to further reduce borrowing costs.
While painting a rosier inflation picture, the central bank downgraded its growth forecasts for the British economy this year, from 1.2% to 0.9%, and for 2027, from 1.6% to 1.5%. It is also expecting the unemployment rate to rise to 5.3% this year, having said in November that it would peak at 5.1%
Lower interest rates help spur economic growth by reducing borrowing costs, which can lead to increased spending by consumers and boost investment by businesses. But that can also fuel higher prices.
Following Thursday's decision and the tight vote split, economists said there are likely to be at least two more quarter-point rate cuts this year.
“A cut at the next meeting in March is most certainly on the table,” said Luke Bartholomew, deputy chief economist at asset management firm Aberdeen. "And even if it takes a bit longer for the next cut to come through, we still think there is a strong case for rates to eventually fall to 3% later this year.”
People walk in front of the Bank of England, at the financial district in London, Thursday, Feb. 5, 2026 as the Bank of England holding its first interest rate meeting in 2026 at a time when inflation in the UK remains above target and economic growth is stubbornly low. (AP Photo/Kin Cheung)
A man walks in front of the Bank of England, at the financial district in London, Thursday, Feb. 5, 2026 as the Bank of England holding its first interest rate meeting in 2026 at a time when inflation in the UK remains above target and economic growth is stubbornly low. (AP Photo/Kin Cheung)
A man walks in front of the Bank of England, at the financial district in London, Thursday, Feb. 5, 2026 as the Bank of England holding its first interest rate meeting in 2026 at a time when inflation in the UK remains above target and economic growth is stubbornly low. (AP Photo/Kin Cheung)
FILE - Pedestrians pass the Bank of England in London, on Dec. 18, 2025. (AP Photo/Kirsty Wigglesworth, File)
HELSINGBORG, Sweden (AP) — NATO allies and defense officials expressed bewilderment Friday at U.S. President Donald Trump’s announcement that he would send 5,000 U.S. troops to Poland just weeks after ordering the same number of forces pulled out of Europe.
The apparent change of mind came after weeks of statements from Trump and his administration about reducing — not increasing — the U.S. military footprint in Europe. Trump's initial order set off a flurry of action among military commanders and left allies already doubtful about America's commitment to Europe's security to ponder what forces they might have to backfill on NATO's eastern flank with Russia and Ukraine.
Earlier this month, the Trump administration said it was reducing levels in Europe by about 5,000 troops, and U.S. officials confirmed about 4,000 service members were no longer rotating into Poland from Germany. The dispatch to Germany of U.S. personnel trained to fire long-range missiles was also halted.
But in a post on Truth Social on Thursday, Trump said he would now send "an additional 5,000 Troops to Poland,” citing his strong ties with Polish President Karol Nawrocki, whom Trump endorsed in elections last year.
“It is confusing indeed, and not always easy to navigate,” Swedish Foreign Minister Maria Malmer Stenergard told reporters Friday at a meeting she was hosting of her NATO counterparts, including U.S. Secretary of State Marco Rubio.
Ministers from the Netherlands and Norway were sanguine about Trump’s latest move, as was Latvian Foreign Minister Baiba Braže, who said allies knew the U.S. troop “posture was being reconsidered, and now there is no change of posture. For now.”
U.S. defense officials also expressed confusion. “We just spent the better part of two weeks reacting to the first announcement. We don’t know what this means either,” said one of two officials who spoke on condition of anonymity to discuss sensitive military matters.
But Rubio said Washington’s allies understand that changes in the U.S. troop presence in Europe will come as the Trump administration reevaluates its force needs. “I think there’s a broad recognition that there are going to be eventually less U.S. troops in Europe than there has historically been for a variety of reasons,” he said.
The latest surprise came despite a U.S. pledge to coordinate troop deployments, including one from NATO’s top military officer, U.S. Lt. Gen. Alex Grynkewich, on Wednesday.
Trump's initial announcement that he would withdraw troops came as he fumed over remarks by German Chancellor Friedrich Merz, who said that the U.S. was being “humiliated” by the Iranian leadership and criticized what he called a lack of strategy in that war.
Trump told reporters that the U.S. would be cutting even more than 5,000 and also announced new tariffs on European cars. Germany is the continent’s biggest auto producer.
Rubio insisted that Trump’s decision “is not a punitive thing. It’s just something that’s ongoing.”
About 80,000 U.S. troops are stationed in Europe. The Pentagon is required to keep at least 76,000 troops and major equipment on the continent unless NATO allies are consulted and there is a determination that such a withdrawal is in U.S. interests.
The withdrawal of 5,000 troops might drop numbers below that limit.
But Trump's latest post suggests that troop numbers in Europe would not change. Polish Foreign Minister Radek Sikorski welcomed the decision to send more forces to his country, saying it ensures that “the presence of American troops in Poland will be maintained more or less at previous levels.”
NATO Secretary-General Mark Rutte also welcomed the move. On Thursday, before Trump took to Truth Social again, Rutte had underlined that it was important for Europe to take care of its own security. “We have a process in place. This is normal business,” he told reporters.
At NATO headquarters in Brussels, meanwhile, U.S. officials briefed the allies on the Pentagon's aims for its commitments to the NATO Force Model, which involves contingency planning for Europe’s defense in the event of serious security concerns. It was widely expected that a further reduction of U.S. forces would be coming.
Asked whether any cuts were announced, Rutte said: “I’m afraid it’s much more complicated than that.” He said the procedure “is highly classified” and declined to give details.
Rubio played down concerns about a shift in U.S. force levels in Europe, saying: "Every country has to constantly reevaluate what their needs are, what their commitments are around the world, and how to properly structure that.”
Cook reported from Brussels. Associated Press writer Emma Burrows in London contributed.
United States Secretary of State Marco Rubio speaks with journalists during a meeting of NATO foreign ministers in Helsingborg, Sweden, Friday, May 22, 2026. (AP Photo/Julia Demaree Nikhinson, Pool)
United States Secretary of State Marco Rubio, front second left, and NATO Secretary General Mark Rutte, front left, speak with each other during a group photo at a meeting of NATO foreign ministers in Helsingborg, Sweden, Friday, May 22, 2026. (AP Photo/Julia Demaree Nikhinson, Pool)
United States Secretary of State Marco Rubio, left, and NATO Secretary General Mark Rutte look at each other as they deliver a statement during a meeting of NATO foreign ministers in Helsingborg, Sweden, Friday, May 22, 2026. (AP Photo/Julia Demaree Nikhinson, Pool)
Latvian Foreign Minister Baiba Braže speaks at the doorstep of the NATO foreign ministers' meeting at Sea U in Helsingborg, Sweden, Friday, May 22, 2026. (Johan Nilsson/TT News Agency via AP)
United States Secretary of State Marco Rubio, left, and NATO Secretary General Mark Rutte deliver a statement during a meeting of NATO foreign ministers in Helsingborg, Sweden, Friday, May 22, 2026. (AP Photo/Julia Demaree Nikhinson, Pool)
NATO Secretary General Mark Rutte speaks to media at the NATO Foreign Ministers' meeting in Helsingborg, Sweden, Friday, May 22, 2026. (Johan Nilsson/TT News Agency via AP)
Secretary of State Marco Rubio arrives with his wife Jeanette at Malmo Airport, Friday, May 22, 2026, in Malmo-Sturup, Sweden, ahead of a NATO foreign ministers meeting. (AP Photo/Julia Demaree Nikhinson, Pool)
NATO Secretary General Mark Rutte, second from left, shakes hands with Prime Minister of Sweden Ulf Kristersson, as he is greeted by King Carl Gustaf of Sweden, Queen Silvia of Sweden and Minister for Foreign Affairs of Sweden Maria Malmer Stenergard, right, before a dinner at Sofiero Castle in Helsingborg, Sweden, Thursday May 21 2026. (Johan Nilsson/TT News Agency via AP)
Swedish Foreign Minister Maria Malmer Stenergard speaks to media at the NATO Foreign Ministers' meeting in Helsingborg, Sweden, Friday, May 22, 2026. (Johan Nilsson/TT News Agency via AP)
