Bank of England holds interest rates at 4.75% but says UK economy stagnating
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UK interest rates have been held at 4.75% following a divided vote among Bank of England policymakers, as they weighed up concerns over a stagnating economy and persistent inflation. The Bank’s Monetary Policy Committee (MPC) said it was keeping rates unchanged on Thursday after cutting the level in August and again in November.
But it was not a unanimous decision, with six members preferring to keep the base rate at 4.75% while three voted for a 0.25 percentage point cut. New projections from the MPC showed that economic growth will be worse over the final three months of 2024 than it had previously predicted.
It was now expecting zero gross domestic product (GDP) between October and December, weaker than the 0.3% growth it had forecast in November. Concerns over the new growth projections, sluggish demand and a weakening jobs market were enough to encourage three members of the MPC to vote for interest rates to be reduced.
But the majority of the committee felt that inflation remaining above the Bank’s 2% target warranted a more gradual approach to easing monetary policy. It followed new official data on Wednesday showing the rate of Consumer Prices Index (CPI) inflation rose to 2.6% last month, its highest level since March and the second monthly increase.
Governor Andrew Bailey said the central bank needed to make sure inflation returns to the target level on a “sustained basis”. “We think a gradual approach to future interest rate cuts remains right, but with the heightened uncertainty in the economy we can’t commit to when or by how much we will cut rates in the coming year,” he said.
