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Bank of England Holds Rates Steady Amid Inflation Concerns
Confirmed
In Short: The Bank of England has kept interest rates steady but warned of potential hikes if energy prices persist, citing the conflict in the Middle East as a key factor.
Interest rates are used by the Bank to control inflation, which measures the rate at which prices are rising. On Wednesday, official figures showed inflation had risen to 3.1% in August from 2.9% in July.
Despite the concerns, there were some positive notes from the Bank of England. Economic activity has held up slightly better than expected, while a soft labor market and the higher borrowing costs households and businesses have faced since the conflict began should bring inflation down over time.
What's confirmed
- Interest rates are used by the Bank to control inflation, which measures the rate at which prices are rising. On Wednesday, official figures showed inflation had risen to 3.1% in August from 2.9% in July.
- Despite the concerns, there were some positive notes from the Bank of England. Economic activity has held up slightly better than expected, while a soft labor market and the higher borrowing costs households and businesses have faced since the conflict began should bring inflation down over time.
What's still developing
- The Bank of England has held interest rates for the sixth time in a row but said they are likely to rise if high energy prices caused by the conflict in the Middle East continue.
- Bank of England governor Andrew Bailey said the longer the volatility in energy prices persists, "the bigger the impact it will have on inflation and the more likely it is we will need to raise [the] Bank rate to ensure that inflation falls back to our 2% target".
- The Bank's Monetary Policy Committee - which makes the rate decision - was split 6-3 in its vote on holding interest rates.
- Their rate expires in November, and Andy expects his new rate to be at least 4.75%, or £300 more a month, He says that at the start of this year, when he started thinking about the end of his fixed rate deal, he was expecting the Bank of England's core rate to be cut.
- Alongside the interest rate decision, the Bank also said it would halt its so-called "quantitative tightening" programme.
- The Bank said discussions to put in place a plan to reduce the current £488bn stockpile of bonds had started a year ago, implying the change has nothing to do with current market turbulence.
- The main Bank rate has been kept at 3.75% despite an increase in the pace of inflation.
- The Bank now forecasts that inflation will rise more than it previously thought and warned that the price cap on household gas and electricity bills for January is "now expected to rise substantially further".