MercoPress. South Atlantic News Agency

Bank of England leaves rate unchanged at 4.75%, but inflation is increasing with a no economic growth in 2024

Three members of the Bank’s Monetary Policy Committee voted for a rate reduction, while six insisted in keeping them on hold.

The Bank of England on Thursday left interest rates unchanged at 4.75%, despite an inflation rate that reached an eight-month high, pushed by services and wage increases. However three members of the Bank’s Monetary Policy Committee voted for a rate reduction, while six insisted in keeping them on hold.

The bank has already lowered its key rate from 5.25% to 4,75% this year and it is anticipated that following December’s decision three rate reductions can be expected in 2025, in line with what has happened in the European Union and with the US Federal Reserve.
On Wednesday the U.S. Federal Reserve cut interest rates by a quarter point to 4.25%, while the European Central Bank last week did something similar, down a quarter point, the fourth such move of 2024, and now stands at 3,15% to 3,40%.

The Bank of England said the increase in UK headline inflation in November to 2.6% was slightly higher than previously expected, adding that services inflation remained “elevated.”

BOE staff also downgraded their economic forecast for the fourth quarter of 2024, now predicting no growth, compared with the 0.3% expansion predicted in its November report. UK growth figures have come in weaker than expected in recent months, with the economy posting a surprise 0.1% contraction in October.

“The split vote decision and the dovish tone of the minutes suggest that a February interest rate cut remains very much in play, if not yet a done deal,” Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said in emailed comments.

“The Bank of England risks backing itself into a corner over the pace of policy loosening because, with inflation likely to drift higher, the timing of future interest rate cuts could become increasingly complex, especially if stagflation fears become reality.”