The Bank of England kept interest rates at a 15-year high on Thursday, although policymakers were again divided over the best course of action to curb high inflation.
The Bank of England is keeping interest rates steady despite signs of a weakening economy. Britain’s central bank said interest rates should remain high for a “longer” period, with economic growth expected to remain stable for most of the next two years.
Rising interest rates
Six members of the central bank’s nine-member interest rate committee voted to keep the interest rate at 5.25%. amid signs of further decline in inflation and weakening economy. However, they said tight monetary policy would be needed for a “longer” period, implying a stronger position than before.
“Higher interest rates are working and inflation is falling,” bank President Andrew Bailey said in a statement. But he added that the bank needed to get inflation “all the way” to its 2 percent target, so policymakers would be “watching closely to see if further interest rate hikes are needed.”
Ghost of crisis
As the UK prepares for a prolonged period of high interest rates, the economic outlook has worsened. In forecasts accompanying the interest rate decision, the bank said the economy would remain flat for most of the next two years.
The forecasts also highlight the challenge facing policymakers in rooting out high inflation, which remained at 6.7 percent in September. Inflation is expected to be slightly higher in 2024 and 2025 than predicted a few months ago. For example, by the end of next year, inflation will fall to 3.4 percent, compared with the previous forecast of 2.8 percent.
Source: Wprost
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