LONDON: The Bank of England on Thursday kept its key interest rate at 5.0 percent, deciding against consecutive cuts one day after a bumper reduction from the US Federal Reserve.
Following a regular meeting BoE governor Andrew Bailey said the central bank needed “to be careful not to cut too fast or by too much”, as UK inflation stays above its target.
Policymakers voted 8-1 for no change, having narrowly voted for a cut in August. One member wanted the rate reduced to 4.75 percent this time around.
Official data this week showed UK annual inflation unchanged at 2.2 percent in August from July – above the BoE’s two-percent target rate.
Fed cuts rates by half a percentage point, cites ‘greater confidence’ about inflation
But inflation has retreated massively since striking four-decade highs above 11 percent in late 2022.
The US central bank on Wednesday lowered borrowing costs for the first time since the start of the Covid pandemic by opting for a reduction of 50 basis points.
Last week, the European Central Bank cut for the a second time this year. Analysts expect the BoE to next cut in November, while Bailey signalled that more easing was on the way.
“The economy has been evolving broadly as we expected,” he said. “If that continues, we should be able to reduce rates gradually over time. But it’s vital that inflation stays low.”
The BoE hiked borrowing costs 14 times between late 2021 – when they stood at a record-low 0.1 percent – and the second half of last year.
Supply-chain disruptions following Covid lockdowns, together with soaring food and energy prices caused by Russia’s invasion of Ukraine, sent global inflation surging.
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