The Bank of England has announced that it will not be changing UK interest rates, keeping Bank Rate at 5.25%, which is a 16-year high. This decision comes in a rare three-way split among the Bank’s Monetary Policy Committee. Two members of the committee preferred an increase of 0.25 percentage points, while one member preferred a reduction of 0.25 percentage points. The Bank’s decision to keep interest rates the same aligns with City forecasts and will likely disappoint borrowers, such as mortgage holders, hoping to see a drop in borrowing costs.
The Bank of England also released its latest monetary policy report, revealing that higher interest rates are working to reduce inflation and that it is not yet time to cut rates. The Bank also noted that there is a roughly 50% chance that the UK was in a technical recession at the end of last year.
The decision comes amidst a shift in the Bank’s tone, showing that it is turning its attention towards cutting rates, but not at this time. Members of the Monetary Policy Committee are prepared to adjust monetary policy to return inflation to its 2% target sustainably and will continue to monitor indications of inflationary pressures and resilience in the economy.
The Bank’s decision to keep interest rates the same is significant as this is the first time since the 2008 financial crisis that the Bank of England’s policymakers have been split between raising rates, leaving them on hold, and cutting them.
Looking ahead, there is likely to be a shift towards cutting rates in future meetings, with the Bank preparing to keep a close eye on inflation and the overall resilience of the economy.
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