The Bank of England (BoE) announced it would maintain its interest rate at 5.25% for the second consecutive time, following a series of 14 rate hikes.
The monetary policy committee voted by a majority of 6-3 to maintain the bank rate on 2 November, with three members preferring to increase the Bank Rate by 0.25 percentage points, to 5.5%.
The BoE's decision to keep interest rates unchanged is driven by inflationary pressures affecting UK businesses. It also aligns with recent moves by other central banks worldwide, including the US Federal Reserve and the European Central Bank, which have also opted to maintain their interest rates.
Inflationary pressures continue to mount
While the BoE has relied on interest rates as its primary tool to combat inflation, the central bank still faces challenges in reaching its 2% target by the end of 2025. The MPC anticipates that inflation will eventually fall below the target as reduced domestic inflationary pressures follow a period of economic slack.
The recent decision highlights the ongoing struggle to manage inflationary pressures and their impact on the UK economy. This is evident in Q3 insolvency figures, which contributed to the highest corporate insolvency levels in over two decades.
Explaining that it will have to closely monitor indications of persistent inflationary pressures, the MPC said: "Monetary policy will need to be sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term, in line with the Committee's remit."
Although the central bank has cooled its approach to hiking interest rates, the announcement shows that the MPC is still some way off from reversing its current approach.
The outlook remains positive from the top
However, Chancellor Jeremy Hunt was much more positive about the direction of inflation. "Inflation is falling, wages are rising and the economy is growing. The UK has been far more resilient than many expected, but the best way to deliver prosperity is through sustainable growth," he said shortly after the announcement.
"The Autumn Statement will set out how we will boost economic growth by unlocking private investment, getting more Brits back to work, and delivering a more productive British state."
Andrew Bailey, BoE governor said:
"Inflation is falling, and we expect it to keep falling this year and next. Our increases in interest rates are working to bring inflation back to the 2% target."
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