The Bank of England has warned against complacency after its interest rate was frozen at 5.25%.
Governor Andrew Bailey said he is determined to bring inflation back down to the target level of 2% – but with current rates at 6.7%, he added that “the job isn’t done yet”.
And amid speculation that the Bank’s base rate could now be close to peaking, he warned: “I can tell you we have not had any discussion on the Monetary Policy Committee about reducing rates because that would be very, very premature.”
The decision to leave the interest rate unchanged came a day after inflation unexpectedly fell by more than expected – ending the longest successive period of “tightening”.
Before now, the Bank had raised rates 14 times in a row – and the last time they were left unchanged was in November 2021.
The Monetary Policy Committee’s latest vote was a narrow one – and while five members had voted in favour of a freeze, four had felt rates should rise further.
Analysis: This freeze will still be painful
It is arguably the most exciting non-event in recent economic history.
Today, for the first time since late 2021, the Bank of England voted to leave borrowing costs unchanged.
Now in some senses, this is indeed a non-event. Interest rates are no higher than they were yesterday, but the cost of borrowing remains painfully high for many households.
Those due to refinance their mortgages in the coming months will still see a sharp increase in their rates compared with two or five years ago. The cost of living crisis is still with us.
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