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The Bank of England on Thursday held interest rates at a 15-year high as fresh data shone a spotlight on the UK’s frail economy.
The Monetary Policy Committee (MPC) met for the final time this year and decided to keep interest rates – which help dictate the mortgage rates set by High Street banks – at 5.25 per cent.
Interest rates has been hiked by the central bank in 14 consecutive meetings in an attempt to bring down soaring inflation by putting pressure on consumer spending.
However, it has now held rates for a third consecutive time, despite inflation falling and concerns about Britain’s weak future prospects for economic growth.
A Treasury spokesperson said:“We have turned a corner in our fight against inflation and real wages are rising, but we must keep driving inflation out of the economy to reach our 2% target. “
It comes just a day after the gross domestic product (GDP) is thought to have fallen 0.3 per cent during October, down from 0.2 per cent growth in September, the Office for National Statistics (ONS) said.
The figures put further pressure on beleagured prime minister Rishi Sunak who had promised voters that growing the economy was one of his top priorities.
Paul Dales, chief UK economist at Capital Economics, told Reuters that the October data suggested that the UK could be in a recession.
“That may nudge the Bank of England a little closer to cutting interest rates, although when leaving rates at 5.25% tomorrow the Bank will probably push back against the idea of near-term rate cuts,” he said.
The BoE’s governor, Andrew Bailey, and other member of the MPC, had earlier warned that interest rates will remain where they are for the foreeable future amid continuing concerns about inflation.
At Parliament’s Treasury Committee last month, Mr Bailey suggested the threat of UK inflation is being underestimated and said the BoE is still focused on concerns over persistent inflation.
He indicated that inflation in the services sector, where most Britons spend their money, is likely to remain at around 6 per cent through the start of 2024.
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