BoE Keeps Interest Rates Unchanged For First Time In Almost Two Years


The Bank of England decided to maintain its key interest rate unchanged for the first time since December 2021 as inflation slows.

In a deeply divided decision, five members of the BoE's Monetary Policy Committee voted to keep the rate at 5.25%, the highest level in 15 years. Other four members were in favor of a 0.25-basis-point increase. The bank still expressed some concern about the outlook for inflation.

"CPI inflation is expected to fall significantly further in the near term, reflecting lower annual energy inflation, despite the renewed upward pressure from oil prices, and further declines in food and core goods price inflation," the BoE said in a statement announcing the decision. "Services price inflation, however, is projected to remain elevated in the near term, with some potential month-to-month volatility."

Consumer prices in the UK slowed to 6.7% in August from 11.1% in October of 2022. The BoE expects inflation to return to its 2% target by the second quarter of 2025.

"The MPC will continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including the tightness of labour market conditions and the behaviour of wage growth and services price inflation," the bank said. "Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures."

The decision comes one day after the Federal Reserve also kept the US borrowing costs unchanged in the range of 5.25% to 5.5%, while indicating that there could be another increase before the end of the year.

The European Central Bank raised its benchmark interest rate to a record high of 4% on Sept. 14 and suggested that the tightening cycle has come to an end.