Yahoo Finance Bank of England holds interest rates at 15-year high
The Bank of England has left interest rates unchanged at 5.25% as inflation continues to fall from record highs.
The Monetary Policy Committee voted by a majority of 6-3 in favour of keeping rates steady. The move, which was widely expected by economists, means UK interest rates remain at a 15-year high.
It is the second time since September that Threadneedle Street has decided against raising interest rates.
Governor Andrew Bailey has said higher interest rates "are working" to curb inflation. "But we need to see inflation continuing to fall all the way to our 2% target," he added.
"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."
Inflation has eased from double-digit figures and came in at 6.7% in the year to September, unchanged from the previous month, but considerably higher than in other G7 economies.
Read more: Interest rates: What Bank of England's decision means for your finances
The Bank of England has said it expects a sharp slowdown in inflation to 4.8% in October and further falls next year, as energy and food prices ease.
Chancellor Jeremy Hunt responded to the Bank of England's interest rates decision by stating that inflation is falling and economy growing.
"Inflation is falling, wages are rising and the economy is growing," Jeremy Hunt said in a statement, adding that the UK has been "far more resilient than many expected" but growth was still needed to "deliver prosperity".
"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," he said.
However, the Bank has lowered its forecasts for the UK economy and expects zero growth from now, across the whole of next year – when there is likely to be a general election – and into 2025.
“UK economic growth is slowing,” the Bank said in its inflation report.
The Monetary Policy Committee voted by a majority of 6-3 to hold #BankRate at 5.25%. Find out more in our #MonetaryPolicyReport: https://t.co/DlCn88I5ut pic.twitter.com/j5wFmmTtsb
— Bank of England (@bankofengland) November 2, 2023
Bailey refused to say where he thinks interest rates will settle in the near future. "As a committee we don't spend time discussing what we think the equilibrium rate for rates is," he told journalists.
In its forecasts, the central bank said inflation will remain above 2% until the final quarter of 2025.
Analysts predict the hiking cycle is over, even as inflation remains more than three times over the Bank of England’s target of 2%.
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.
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However, the consensus is that interest rates will only be cut in 2024. "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," Suter added.
Other central banks have decided to also hold rates, like the Federal Reserve and the European Central Bank.
Kellie Steed, Uswitch.com mortgage expert, said the decision would be welcomed news for homeowners but pressure remains.
“Mortgage rates have reduced slightly in recent months, although they are still nowhere near the historic lows seen a few years ago. The average two-year fixed mortgage rate remains above 6%, so those coming up to remortgaging are still likely to face much higher costs than they currently do," she said.
“The fact remains, though, that rates are unlikely to drop back to the 1-2% level that many are used to. And with the average standard variable rate remaining well above 8%, there are still possible savings to be made by remortgaging to a new deal," she added.
Watch: Federal Reserve leaves interest rates unchanged, though experts still foresee hikes
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