Financial News: Bank Of England Holds Key Rate

Bank Of England Holds Key Rate

(RTTNews) - The Bank of England maintained its key interest rate on Thursday but cautioned that there is a risk of material second-round effects from the energy price shock.

The Monetary Policy Committee voted 8-1 to hold the bank rate at 3.75 percent. The current rate remains at the lowest since June 2023. Previously, the BoE had reduced the rate by 25 basis points each in August and November last year. At the meeting, Huw Pill voted to increase Bank Rate by 0.25 percentage points, to 4 percent. He said a prompt but modest hike in interest rate will help mitigate upside risks to price stability stemming from a re-emergence of intrinsic inflation persistence.

"Monetary policy cannot influence energy prices but will be set to ensure that the economic adjustment to them occurs in a way that achieves the 2% inflation target sustainably," the MPC said.

Bank staff projected inflation to decline to 3.1 percent on average in the second quarter of 2026, before rising back to 3.3 percent in the third quarter. Inflation was expected to rise somewhat further in the fourth quarter.

The MPC observed that inflation is likely to be higher later this year as the effects of higher energy prices pass through.

Policymakers judged that there were likely to be some second-round effects but continued weakness in activity would limit the strength of these effects.

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