Following the U.S. Federal Reserve System (Fed), the Bank of England has also temporarily stopped raising its key interest rate.
The Bank of England, the central bank of England, decided to freeze the key interest rate at 5.25 percent at a monetary policy meeting held on the 21st (local time). The Bank of England began raising its key interest rate in December 2021, when inflationary pressure intensified away from the aftermath of the global spread of the COVID-19 virus, and has raised it for the 14th consecutive time.
The Bank of England said five out of nine members of the Monetary Policy Council chose to freeze the key interest rate, while four insisted on a quarter-point increase. One member of the committee, Andrew Bailey, voted to freeze the benchmark interest rate.
The Bank of England’s choice to freeze its key interest rate seems to have been influenced by signs of slowing inflation, the dark outlook for the UK economy, and the U.S. Fed rate freeze. The U.K.’s consumer price index (CPI) rose 6.7 percent in August year-on-year, the lowest increase since March last year (6.2 percent). In addition, the International Monetary Fund (IMF) predicted that the UK’s economic growth rate will be -0.3% this year and 1% next year. This is at the bottom of the G20 list. Earlier on the 20th, the previous day, the U.S. Fed decided to freeze its key interest rate, which is currently 5.25-5.5%.
However, there is a possibility that the Bank of England will raise interest rates again to ease inflationary pressure. UK inflation is still more than three times higher than the Bank of England target of 2%. Bank of England Governor Bailey issued a statement saying: “Inflation has fallen a lot in recent months. That’s good news,” he said. “But there is no room for complacency. We need to make sure that inflation returns to normal and we will continue to make necessary decisions to do so,” he said, hinting at the possibility of further rate hikes. On the 20th, Jerome Powell, chairman of the U.S. Fed, also hinted at the possibility of further rate hikes within this year, saying, “We are ready to raise interest rates further if deemed appropriate.”
