THE Bank of England faced union pressure today to accelerate interest rate cuts after holding rates and warning of slower growth and rising unemployment.

Interest rates were kept at 3.75 per cent by the Bank, saying the decision was needed to ensure inflation stays close to its 2 per cent target.

New forecasts from its monetary policy committee show inflation is now expected to return to target this year, earlier than previously forecast.

The Bank said measures announced in Chancellor Rachel Reeves’s autumn budget, including support to reduce household energy bills from April, would help slow inflation.

Inflation, last recorded at 3.4 per cent in December, is expected to fall more quickly from April.

Despite improved inflation projections, the Bank downgraded its outlook for growth.

It said the economy grew by 1.4 per cent in 2025 and cut forecasts for 2026 to 0.9 per cent and for 2027 to 1.5 per cent, citing subdued consumer demand and labour market pressures.

Unemployment is now expected to rise to 5.3 per cent this year, higher than previously forecast, before easing gradually later in the decade.

The Bank said households remain cautious on spending, with supermarkets reporting only “modest” growth.

But it said that it had cut interest rates six times over the past 18 months and further reductions remain likely this year.

TUC general secretary Paul Nowak said: “Working people in every corner of the country are still being hammered by the living standards crisis.

“The Bank was too cautious last year. They should go further and faster with a rapid-fire sequence of rate cuts in the months to come.”

Unite general secretary Sharon Graham said: “The Bank of England is prolonging the cost-of-living crisis.

“Workers need lower interest rates to boost living standards and spur investment.”