Bank of England Keeps Borrowing Rates Steady Amid Economic Concerns

Despite mounting worries over the British economy's health, the Bank of England has decided to keep borrowing rates steady. In a move announced on Thursday, the vital interest rate remains at a 15-year high of 5.25%, unchanged since August after a near two-year period of rising rates. This decision signals the bank's intent to maintain its current course for the foreseeable future, diverging from the United States Federal Reserve's approach.

Monetary Policy Committee Vote

The Bank of England's Monetary Policy Committee was not unanimous in its decision; six out of nine members voted to keep rates steady, while three members were in favor of a quarter-point hike. This split decision hints that rate cuts are not currently in the cards for the UK's economy.

The Outlook on Interest Rates

Bank Governor Andrew Bailey emphasized a continued 'restrictive' monetary policy stance for an extended period ahead. With inflation recently decreasing from over 11% to 4.6% year-on-year as of October, efforts seem to be paying off. Yet, with inflation still above the bank's comfort level, Bailey acknowledges there's 'still a long way to go' before hitting the 2% inflation target.

Impact of Rate Increases

The steady rates come after two years of hikes aimed at curbing inflation, first boosted by supply chain issues related to the pandemic, and then by rising food and energy prices following Russia's invasion of Ukraine. While these raises have made progress against inflation, the subsequent decrease in consumer spending, driven by higher mortgage rates, has placed a strain on the UK's economic growth.

Banking, Economy, Rates