UK borrowing costs held at 5.25% as Bank of England downgrades economic outlook
Governor Andrew Bailey warned it is ‘much too early’ to think about cutting rates.
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.UK interest rates have been held at 5.25%, providing some relief for borrowers, as the Bank of England downgraded its forecast for economic growth and said inflation could stay higher for longer.
Governor Andrew Bailey warned it is “much too early” to think about cutting rates, as the Monetary Policy Committee (MPC) voted by a six-three majority to keep the base rate at 5.25%.
Three members preferred to increase rates to 5.5%.
“We’ve held rates unchanged this month, but we’ll be watching closely to see if further rate increases are needed,” Mr Bailey said.
In new economic projections produced by the MPC, the UK economy is expected to flatline next year with 0% growth over 2024, down from a 0.5% increase predicted in the August report.
The outlook for this year remains the same, with gross domestic product (GDP) expected to grow 0.5%.
The Bank, which uses interest rates as a tool to bring inflation down to its 2% target, said price rises have been slowing more rapidly than previously expected.
Energy, food, and goods prices are acting as the biggest drag on inflation.
The MPC now thinks Consumer Prices Index (CPI) inflation will drop sharply to about 4.6% over the final three months of 2023 – meaning Prime Minister Rishi Sunak will be well within his target to halve inflation by the end of the year.
CPI will then average about 3.3% in 2024, higher than the 2.5% predicted in August, before returning to target by the end of 2025, later than previously thought.
More than half of the impact of the Bank’s two-year-long cycle of increasing rates is still set to come through the economy, largely through housing investment as well as on household spending, the MPC said.
Many mortgage-holders who are due to reach the end of their fixed-rate deals have already started adjusting their spending in anticipation of higher costs.
The Bank’s decision comes after the US Federal Reserve also opted to hold interest rates steady on Wednesday, in a sign that it thinks inflationary pressures are easing.