Bank of England Holds Rates Steady at 4% in Tight Vote
In a tense decision, the Bank of England (BoE) voted 6-3 to maintain interest rates at 4%, pausing its aggressive hiking cycle despite stubborn inflation. The Monetary Policy Committee (MPC) cited economic uncertainty, slowing growth, and global banking instability as key reasons for the hold.
Why the BoE Paused Rate Hikes
The UK’s inflation rate remains at 6.7%, well above the BoE’s 2% target. However, with GDP shrinking by 0.5% in July and business activity stalling, policymakers opted for caution. Governor Andrew Bailey stressed a data-driven approach, stating, “We must balance inflation control with avoiding unnecessary economic harm.”
Three MPC members—Jonathan Haskel, Catherine Mann, and Swati Dhingra—dissented, advocating for a 0.25% increase to curb inflation.
How This Compares to Global Central Banks
- The Federal Reserve also paused its rate hikes last week.
- The European Central Bank (ECB) raised rates by 0.25%, highlighting differing regional risks.
UK Economic Outlook: Stagnation or Recovery?
The BoE predicts inflation to drop to 5% by year-end, helped by falling energy costs. Yet, wage growth at 7.8% keeps underlying price pressures high.
Key risks include:
– Weakening consumer spending
– Tighter lending conditions from global banking stress (SVB, Credit Suisse)
– Mortgage approvals declining as higher rates bite
Market Reaction & Future Expectations
- Sterling dipped slightly, while gilt yields fell
- Traders now expect a peak rate of 4.25%, down from 4.75% earlier this year
- Next key meeting: November 2023—will the BoE hike again?
Expert Reactions: Divided Opinions
✅ Supporting the Pause:
“Prudent move—recession risks are rising.” — David Blanchflower, ex-MPC member
❌ Criticizing the Hold:
“Delaying hikes risks inflation spiraling.” — Vicky Pryce, Economist
What’s Next for Borrowers & Savers?
- Mortgage holders: Temporary relief, but rates remain high
- Savers: Low returns persist amid inflationary pressures
The BoE’s next move depends on whether inflation cools faster than the economy weakens.
— Reported by [Your Name], NextMinuteNews
