The Bank of England today decided to hold interest rates at 5% amid sluggish economic growth.
The Bank’s Monetary Policy Committee (MPC) voted 8-1 to leave interest rates at 5%, with only one member voting to cut rates to 4.75%
MPC, which uses interest rates as a tool to control inflation, resisted any temptation to cut rates for the second meeting running.
The decision comes a day after UK inflation stuck at 2.2% in August, above the Bank’s 2% target.
Andrew Bailey, governor of the Bank of England, said it is “vital that inflation stays low”, adding that “we need to be careful not to cut [rates] too fast or by too much”.
The decision to hold interest rates was widely expected and experts are predicting the Bank will cut rates further in November.
Jonny Black, chief commercial & strategy officer at Abrdn Adviser, said: “The decision to hold the base rate comes as no surprise, and all eyes are now looking ahead to November for a possible ‘end of the year cut’.
“But the Bank of England won’t pull the trigger until its sure inflation is under control and can fully gauge the impact of Rachel Reeves’ upcoming Budget, which promises tough sacrifices ahead for the country.
“In such a fast-moving, unpredictable environment, clients will need the expertise of advisers to help them make sense of what the Bank is juggling and to feel confident that their financial strategies will keep working.”
Adam Ruddle, chief investment officer at LV=, added: “We anticipate a further rate cut at the next meeting in November as the current level is overly restrictive, particularly as other central banks, such as the Federal Reserve, have begun their rate-cutting cycles, placing pressure on the Pound, which will soften exports and weaken the UK economy.
“Falling rates will be welcome news for mortgage holders, where according to LV= research, one in four are worried about their repayments.”
However, DeVere Group’s CEO Nigel Green called the Bank’s decision “another mistake”, pointing out that it should have accelerated interest-rate cuts instead.
He said: “This is no time for hesitation. The Bank of England’s decision to pause rate cuts is a missed opportunity.
“We believe they need to adopt an aggressive approach now to further lower borrowing costs, drive growth and restore confidence in the UK economy.
“Holding interest rates steady may seem like a cautious move, but it fails to address the urgent need to support economic recovery and competitiveness.”
