Bank of England leaves interest rates on hold at 4.75%
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The Bank of England has left its benchmark interest rate on hold at 4.75% in a blow to homeowners and business. Although the decision from the Bank’s Monetary Policy Committee (MPC) was widely expected in the City it will nevertheless come as a disappointment to borrowers hoping for relief from high interest rates.
The MPC voted by 6 to 3 for the hold with three members preferring a 0.25% cut. In a summary of the MPC meeting the Bank said: “A gradual approach to removing monetary policy restraint remains appropriate. Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further. “.
Hopes of a cut have faced over recent weeks as it became clear that inflation will take longer than previously hoped to bring fully under control. Strong wages growth of 5.2% and a rise in the rate of inflation to 2.6% in November, the highest level since March, put paid to any last lingering chances of the Bank reducing the cost of borrowing.
The Banks decision came the day after the US Federal Reserve cut its key rate by a quarter of a percentage point to between 4.25% and 4.5% yesterday. Traders now expect a slower pace of cuts next year on both sides of the Atlantic with markets only pricing in two cuts next year and yields on ten year gilts rising to 4.65% the highest level since the financial crisis in 2008. The next cut may not come until May.
