UK interest rates held at 4.75% amid ‘heightened economic uncertainty’
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The Bank of England has held interest rates at 4.75% as it cautioned over “heightened uncertainty in the economy” following the UK Budget and US presidential election. The Monetary Policy Committee (MPC) said it was keeping rates unchanged on Thursday after cutting the level in August and again in November.
Six members of the MPC preferred to keep the base rate at 4.75%, while three voted for a 0.25 percentage point reduction. Governor Andrew Bailey said the central bank needs to make sure inflation returns to its 2% 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. New official data on Wednesday showed the rate of Consumer Prices Index (CPI) inflation rose to 2.6% last month, its highest level since March and the second monthly increase.
The Bank said this was slightly higher than its previous expectations and reflected stronger price rises in core goods and food, while inflation across the services sector also remained elevated. This data, along with continued wage growth, persuaded six members of the nine-person committee to maintain a gradual approach to lowering rates.
