jiliko Bank of England keeps main UK interest rate on hold at 4.75%

jiliko

FILE – The Bank of England is pictured in London, on Aug. 1, 2024. (AP Photo/Alberto Pezzali, File)

LONDON — The U.K.’s central bank warned Thursday of “heightened uncertainty” as it kept interest rates on hold after inflation moved further above target, even at a time when the British economy is flatlining at best.

The Bank of England’s nine-member Monetary Policy Committee kept its main interest rate unchanged at 4.75% with new data showing inflation rising to 2.6%, further above the bank’s 2% target.

Article continues after this advertisement

In response the rate-setting panel, which last cut its key rate in November, is taking a cautious stance because lower borrowing costs could potentially stoke inflation even further.

FEATURED STORIES BUSINESS BSP unveils new polymer banknote series BUSINESS BIZ BUZZ: MVP confirms John Hay plans BUSINESS Free toll on SMC expressways on Christmas, New Year's Eve

READ: Bank of England cuts UK interest rates again

The decision was widely anticipated in financial markets yet surprisingly, as many as three of the members voted for a quarter-point cut. That could hint at a further reduction at the next policy meeting in February if there are no big inflation surprises.

But oil prices fell as markets were unimpressed with a pledge by China’s finance minister to boost the world’s second-biggest economy.

Article continues after this advertisement

“We need to make sure we meet the 2% inflation target on a sustained basis,” said Bank Gov. Andrew Bailey, who voted to keep rates on hold. “We think a gradual approach to future interest rate cuts remains right, but with the heightened uncertainty in the economy we can’t commit to when or by how much we will cut rates in the coming year.”

Article continues after this advertisement

Struggling sectors in the U.K. economy and homeowners are hoping for more cuts next year that would provide some relief. The British economy has now contracted for two months in a row.

Article continues after this advertisement

“The bank’s decision to keep interest rates on hold, while expected, will still come as a palpable blow to households battling with burdensome mortgage bills and businesses facing a jump in costs following the autumn budget,” said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales.

The bank’s decision arrives a day after the U.S. Federal Reserve reduced interest rates, but Chair Jerome Powell signaled that the Fed would be slowing the pace of rate cuts going forward after inflation forecasts were revised higher.

Article continues after this advertisement

The minutes to the Bank of England’s decision shows that rate-setters cautioned over the economic outlook in the wake of the new Labour government’s first budget and the outcome of the U.S. presidential election.

Critics argue that the budget in October has both elevated inflation pressures while also damping growth. A big increase in business taxes may prompt companies to offset higher costs by raising prices or cutting down on hiring. The government argues that it needed to raise taxes to shore up public finances and inject money into cash-starved public services.

casino online paypal

And with Donald Trump returning to the White House in January, there’s uncertainty as to whether the incoming U.S. administration will impose tariffs on imports, an economic strategy that could lead to a tit-for-tat response that stokes inflation and lowers growth.

Still, inflation in the U.K. and across the world is far lower than it was a couple of years ago, partly because central banks dramatically increased borrowing costs from near zero during the coronavirus pandemic when prices started to shoot up, first as a result of supply chain issues and then because of Russia’s full-scale invasion of Ukraine which pushed up energy costs.

Your subscription could not be saved. Please try again. Your subscription has been successful.

Subscribe to our daily newsletter

SIGN ME UP

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.

As inflation rates have fallen from multi-decade highs, the central banks have started cutting interest rates, though fewjiliko, if any, economists think that rates will fall back to the super-low levels that persisted in the years after the global financial crisis of 2008-2009.

READ NEXT Asian markets mixed as traders digest Fed’s hawkish pivot 6 power projects endorsed for operating permits EDITORS' PICK PNP: P2.4B drugs seized, 809 arrested in 2024 operations Wet, rainy Friday in many parts of PH PCG: Over 32,000 passengers seen in ports nationwide Yearend 2024: Carlos Yulo and a golden year for Philippine sports Chavit Singson’s ratings takes biggest jump in Dec tangere survey Maris Racal’s film ‘Sunshine’ all set for US premiere MOST READ Comelec warns against 2025 election 'advanced victory' scheme MJ Lastimosa shocked as name dragged into ‘infidelity’ scandal SC fires judge involved in wife’s illegal deals Chavit Singson’s ratings takes biggest jump in Dec tangere survey Follow @FMangosingINQ on Twitter --> View comments