BoE holds interest rates at 5%
The BoE lowered interest rates to 5% for the first time last month, having previously held them at a 16-year high of 5.25% since August 2023
The Bank of England (BoE) has decided to hold interest rates at 5% this month, having lowered them for the first time in four years in August.
The bank voted by a majority of 8-1 to keep the rate the same in a bid to help “sustain growth and employment”. One member of the committee preferred to lower the rate to 4.75%.
The BoE lowered interest rates to 5% last month. Since August 2023, they had remained at a 16-year high of 5.25% in a bid to combat rising inflation.
However, inflation has eased in recent months, and yesterday (18 September) the ONS confirmed that inflation held steady at 2.2% in August, remaining unchanged since July.
This is still above the monetary policy committee’s target of 2%, and the bank also warned that inflation is expected to increase to around 2.5% towards the end of this year as declines in energy prices last year fall out of the annual comparison.
In today’s announcement, the BoE also said that headline GDP growth is expected to return to its underlying pace of around 0.3% per quarter in the second half of the year.
The BoE today said: “Monetary policy decisions have been guided by the need to squeeze persistent inflationary pressures out of the system so as to return CPI inflation to the 2% target both in a timely manner and on a lasting basis. Policy has been acting to ensure that inflation expectations remain well anchored.”
