Bank of England Holds Rates After U.K. Inflation Slows

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Britain’s central bank held its key interest rate at the highest level in 16 years for the fifth straight meeting.

The Bank of England held interest rates at the highest level in 16 years, even as inflation in Britain has fallen to its slowest pace in more than two years.

On Thursday, policymakers at the central bank left their key rate at 5.25 percent for the fifth consecutive meeting. The decision to hold was widely expected, but analysts were tracking the votes by the nine-person rate-setting committee to see if a consensus was emerging about whether price increases were under control and when rate cuts may begin.

Eight members of the committee voted to hold rates, with the two policymakers who voted for higher rates last month dropping their stance. One member voted to cut rates.

The Bank of England held rates “because we need to be sure that inflation will fall back to our 2 percent target and stay there,” Andrew Bailey, the governor of the central bank, said in a statement. “We’re not yet at the point where we can cut interest rates, but things are moving in the right direction.”

Monetary policy needed to be “restrictive for an extended period,” according to the minutes of this week’s meeting. But, officials added, policy could remain restrictive even after interest rates were reduced, providing the clearest signal so far that rate cuts were on their way.

For much of last year, inflation in Britain was stubbornly high. Prices rose faster than in neighboring European countries and a tight labor market pushed up wages. Those concerns have recently started to ease. Data published on Wednesday showed that the annual rate of inflation dropped to 3.4 percent last month, down from 4 percent in January and the lowest reading since September 2021.

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Annual change in Britain’s Consumer Prices Index

Source: Office for National Statistics

By The New York Times

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