The Bank of England is widely expected to hold interest rates when it meets on Thursday, as the U.K. faces economic headwinds both at home and abroad.

The central bank is highly likely to keep its benchmark interest rate at 4.5% at its March meeting, given the unpredictability of President Donald Trump’s trade tariffs and a fledgling global trade war, and how those factors could affect inflation in the U.K.

The BOE is also convening as the U.K economy shows signs of stalling, with monthly growth data showing anemic output. Thursday’s meeting comes just days before U.K. government taxation changes come into force that have proven unpopular with businesses, which say their rising tax burden could dent growth, investment and jobs.

For its part, the Bank of England already warned at its last meeting in February that it would tread carefully, as it downgraded the U.K.’s growth forecast for 2025 and predicted a temporary rise in the rate of inflation to 3.7% — above the bank’s target of 2% — which BOE policymakers said would be caused by higher energy prices.

As for Trump’s tariffs, Bank of England Governor Andrew Bailey warned earlier in March that potential trade duties were another threat to the country’s economy, and growth, telling British lawmakers that “the risks to the U.K. economy, and indeed the world economy, are substantial” and that U.K. citizens would have less money “in their pockets” as a result of tariffs.

Reeves’ ‘Spring Statement’ will be announced alongside economic forecasts from the Office for Budget Responsibility, the U.K.’s independent economic and fiscal forecaster, which gives its assessment on the likely impact of the government’s taxation and spending plans that were announced last fall.

That budget included £40 billion ($51.9 billion) worth of tax rises — with the burden falling mainly on businesses — to plug a black hole in the public finances and allow for investment in public services.

The OBR is widely expected to downgrade its U.K. economic forecasts, putting further pressure on Reeves to amend her policy plans.

“It was not supposed to be like this. U.K. chancellor Rachel Reeves planned to present the government’s official biannual forecast on 26 March without making any changes to policy. However, a rise in market interest rates, high borrowing in fiscal year 2024-25, and a possible downgrade to the Office for Budget Responsibility’s productivity growth assumption have conspired against her,” Andrew Wishart, senior U.K. economist at Berenberg Bank, said in analysis Monday.

“Without spending cuts or tax rises, the OBR would forecast the government missing its fiscal rule of funding day-to-day spending entirely with tax revenue by 2029-30. To avoid six months of speculation about how Reeves will make up the shortfall in the next fully-fledged budget in the autumn, the chancellor must act now,” he added.

The UCLA Anderson Forecast, citing substantial changes to the economy from policies of the Trump administration, issued its first-ever “recession watch” on Tuesday.

UCLA Anderson, which has been issuing forecasts since 1952, said the administration’s tariff and immigration policies and plans to reduce the federal workforce could combine to cause the economy to contract. 

Its analysis was titled, “Trump Policies, If Fully Enacted, Promise a Recession.”

“While there are no signs of a recession happening yet, it is entirely possible that one could form in the near term,” stated a news release from the forecaster. 

U.S. recessions are only officially declared by the Business Cycle Dating Committee of the National Bureau of Economic Research. The committee employs a variety of indicators, including production, employment, income and growth to determine if the economy is contracting. At the moment, none of the specific indicators look to be near levels that would prompt the committee to declare recession. 

The average respondent to the CNBC Fed Survey for March, published Tuesday, forecast a 36% recession probability in the next year, up from 23% in the prior month. But it remains well below the 50% level that prevailed from 2022 and 2023 in the wake of the pandemic and turned out to be wrong. That shows how difficult it is to predict a recession, or even determine if the economy is in one. The Fed Survey also shows that a recession is not the base case for most Wall Street forecasters, only that the concern is somewhat elevated.

Recessions occur when multiple sectors of the economy contract at the same time. The UCLA Anderson Forecast said reductions to the workforce from the administration’s immigration policies could create labor shortages, tariffs will raise prices and could lead to a contraction in the manufacturing sector while changes to federal spending will reduce employment for government workers and private contractors.

“If these and their consequent feedback into the demand for goods and services occur simultaneously, they create a recipe for a recession,” the statement from the forecaster said. 

Federal Reserve officials at this week’s meeting are expected to hold interest rates steady but adjust their views on the economy and possibly the future path for interest rates.

If market pricing is correct, there’s virtually no chance central bank policymakers budge from the current level of their key interest rate, targeted in a range between 4.25%-4.5%. Chair Jerome Powell and his colleagues in recent weeks have advocated a patient approach in which they don’t need to be in a hurry to do anything.

However, they are also expected to drop clues about where things go from here against the uncertain backdrop of President Donald Trump‘s trade and fiscal policies. That could include anything from tweaks in projections for inflation and economic growth to how often, if at all, they expect to lower interest rates further.

“There’s no chance of a cut Wednesday, so all the other stuff becomes more important,” said Dan North, senior economist at Allianz Trade North America. “They’re basically going to say, ‘You know what, we are in no hurry at all now.'”

Indeed, that has been the prevailing message from Powell and his Federal Open Market Committee colleagues. In a speech earlier this month to economists in New York, Powell insisted “there is no need to be in a hurry” as central bankers seek “greater clarity” on where the Trump administration is headed.

New outlook for GDP, inflation, unemployment

The public, then, will be left to pore through updates the Fed makes to its quarterly projections on interest rates, gross domestic product, unemployment and inflation. Based on recent data, the Fed could raise its 2025 outlook for inflation (in December, the outlook was for 2.5% in both core and headline) while lowering its GDP projection (from 2.1%). Powell will host his usual post-meeting news conference.

On the rate question, the Federal Open Market Committee will use its “dot plot” grid of individual members’ intentions.

There’s significant disagreement on what could happen there. The committee could maintain its December outlook for two cuts, remove one or both, or, improbably, add another as a statement of concern over a potential slowdown. Everything seems to be on the table.

“I think it may be one or zero cuts this year, particularly if the tariffs stick,” North said. “I don’t think they’re going to try and bail out the economy by cutting rates, because they know that if they stoke inflation, they’re going to have to go back and start all over again.”

Economists worry the Trump tariffs could reignite inflation, particularly if the president gets more aggressive after the White House releases a global review of the tariff situation on April 2. If the Fed grows more concerned about tariff-fueled inflation, it could turn even more reluctant to cut.

Investors are right to be concerned about the direction the FOMC indicates, said Thierry Wizman, global FX and rates strategist at Macquarie.

“That worry is borne by the suspicion the Fed is not ‘in charge’ anymore, having relinquished control of macroeconomic policy to the Trump administration,” Wizman wrote. “Given the current uncertainty, and the recent increase in inflation expectations, the Fed may find it difficult to signal three more rate cuts, or even two more. It could push one rate cut into 2026, leaving only one cut in the median ‘dot’ for 2025.”

Markets still see two or three cuts

Should the Fed decide to stick with two cuts, it likely will be only “to avoid adding to recent market turbulence,” Goldman Sachs economist David Mericle said in a note.

Major stock market averages are hovering around correction territory, or 10% declines from highs.

In the past, under the idea of a “Fed put,” markets have come to expect the central bank to ease policy in response to market unrest. Traders don’t expect an initial rate reduction to happen until at least June, and are pricing in one additional quarter percentage point easing and about a 50-50 chance of a third move by the end of the year, according to the CME Group’s FedWatch measure of fed funds futures pricing.

But that might even be too ambitious, Wizman said.

“In effect, markets appear to have gotten too dovish on the Fed, and instead of signaling its own confidence in its outlook, the Fed may issue signals of no-confidence, instead. In other words, the FOMC meeting may leave many questions unanswered, as will the press conference by Jay Powell,” he said, using Powell’s nickname.

The committee also could address its “quantitative tightening” program where it is allowing a set level of proceeds from maturing bonds to roll off the balance sheet each month. Markets widely expect the Fed to end the program later this year, and recent meetings have featured discussion about how best to handle the central bank’s $6.4 trillion portfolio of Treasurys and mortgage-backed securities.