The Bank of England (BoE) decided to maintain its interest rates at a 15-year high of 5.25% for the second consecutive meeting, in line with recent actions by the Federal Reserve and European Central Bank. This decision, made on Thursday, halted a nearly two-year series of rate increases aimed at combating inflation.
The decision was taken by six out of nine members of the rate-setting committee, who saw signs of a weakening economy and easing inflation pressures. Inflation was recorded at 6.7 percent in September, triggering the necessity for a sustained restrictive monetary policy to tackle what the committee described as “more deeply embedded inflation persistence”.
Governor Andrew Bailey acknowledged the efficacy of current rates in reducing inflation but emphasized that it must hit their 2 percent targets. The bank’s outlook anticipates economic stagnation over the next two years, with inflation projected to be slightly higher than previously forecasted in 2024 and 2025. It is expected to decelerate to 3.4 percent by the end of next year.
Despite the economic downturn, three committee members noted growing household incomes and positive economic output indicators, proposing a quarter-point rate hike. This proposal came after a previous meeting where five members voted to hold rates.
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