Bank of England stands pat on interest rates
The Bank of England stood pat on interest rates on Thursday, as widely expected.
This marked the second meeting in a row that rates were left unchanged, after the Bank hiked 14 meetings in row from 0.1% in December 2021.
The BoE said it continues to expect GDP to grow by 0.5% this year, but downgraded its outlook for next year to zero growth from 0.5%. The Bank also said that consumer price inflation is likely to be around 4.6% in the fourth quarter, down from a previous forecast of 4.9%.
Sterling got a boost after the announcement, and by 1225 GMT, was trading up 0.5% against the dollar at 1.2214.
BoE governor Andrew Bailey said interest rates were working to curb inflation. "But we need to see inflation continuing to fall all the way to our 2% target," he said.
"We've held rates unchanged this month, but we'll be watching closely to see if further rate increases are needed. It's much too early to be thinking about rate cuts."
Laura Suter, head of personal finance at AJ Bell, said: "The nation will be breathing a sigh of relief that the Bank of England has followed expectations and held interest rates for the second month in a row - hopefully ending almost two years of consistent hikes.
"Maintaining rates at 5.25% will raise hopes that we have finally hit peak interest rates - and that the only route from here is down.
"But anyone hoping for a drop in rates as steep and swift as the climb up will be disappointed. Markets are pricing in no cuts until Autumn next year. It means that rather than a traditional ‘mountain’ shaped rise and fall in rates we’re expecting a table-top mountain, where rates tick along at the same level for almost a year before a slower drop back down.
"The Bank itself says the market expects rates to only hit 4.25% by the end of 2026 -showing how glacial the path down could be. With risks like the conflict in the Middle East and a potential spike in oil prices, not to mention the potential for a surprise in inflation numbers or another economic data point, we can’t entirely rule out any further rate hikes. And the Bank has certainly not ruled it out, if it sees ‘more persistent inflationary pressures’."
She said the fact that a third of the MPC voted for a rate hike shows there is still appetite among the committee to tighten monetary policy further.