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HomeWorldEuropeBank of England left interest rates unchanged at 5.25%

Bank of England left interest rates unchanged at 5.25%

The Bank of England left interest rates unchanged at 5.25%. This completed a cycle of 14 straight increases in borrowing costs.

Financial analysts had anticipated that the Monetary Policy Committee would raise rates for the 15th consecutive time, but Wednesday’s surprise data came as inflation fell. The MPC vote was five to four in favour of leaving interest rates unchanged. Four MPC members voted in favour of raising rates to 5.5%.

This is the first break in rate hikes by the Bank of England since November 2021.

The consumer price index fell to 6.7 per cent in August after 6.8 per cent in July and is at its lowest level since February last year. Bank of England governor Andrew Bailey said:

Inflation has fallen a lot in recent months and we think it will continue to do so. That’s welcome news. But there is no room for complacency. We need to be sure inflation returns to normal and we will continue to take the decisions necessary to do just that.

In his address to the UK government, he outlined some of the factors that policymakers were looking at when making their decision. Food price inflation appears to have peaked, price rises in basic consumer goods have started to decline and external price pressures have eased.

However, not everything is as positive as it seems. Mr Bailey believes that services inflation will remain elevated, weekly earnings growth will exceed inflation by 8.1% and oil prices will continue to rise.

He believes monetary policy needs to be tight enough to achieve the 2% core inflation target, while it is important to take into account the potential threat of “secondary effects of external cost shocks on wage and domestic price inflation”.

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