Bank of England leaves interest rates unchanged at 5.25%, ending run of 14 straight increases
The Bank of England is signalling it may have done enough to tame inflation, but it's definitely not 'job done', as ITV News' Economics Editor Joel Hills reports
The Bank of England has left interest rates unchanged at 5.25% - the first time it has done so in almost two years.
The Monetary Policy Committee had been widely expected to hike rates again, from 5.25% to 5.5%, which would be the highest base rate since February 2008.
But Wednesday's inflation made this outlook a little less likely than before, economists said.
Chancellor Jeremy Hunt said: "We are starting to see the tide turn against high inflation, but we will continue to do what we can to help households struggling with mortgage payments.
"Now is the time to see the job through. We are on track to halve inflation this year and sticking to our plan is the only way to bring interest and mortgage rates down."
Inflation hit 6.7% in August, down from 6.8% in July, and significantly lower than the 7.1% that had been expected. The figures came as a shock to many, and took Bank decision-makers by surprise.
The Bank of England started upping rates from 0.1% in December 2021 and has not missed a single opportunity to do so since then, until now.
It's a decision that won't heap more pressure on mortgage holders as policymakers said they had opted to keep the base rate, which influences how much families need to pay to borrow money, at 5.25%.
But officials still left the door open to further rises in the future, promising to “take the decisions necessary” to return inflation to normal levels.
Four of the nine-person MPC voted to raise rates to 5.5%.
The MPC also downgraded its forecast for the UK’s economy on Thursday.
It now expects gross domestic product (GDP) to rise just 0.1% in the third quarter of this year, compared with the 0.4% rise it forecast in August.
“Inflation has fallen a lot in recent months, and we think it will continue to do so,” said Bank Governor Andrew Bailey, who voted to keep the rate unchanged.
“That’s welcome news. But there is no room for complacency. We need to be sure inflation returns to normal and we continue to take the decisions necessary to do just that.”
The increases have been an attempt to stem inflation, and the Bank's Sarah Breeden, who is expected to join the MPC before November's meeting, said this week she thought inflation could have been double the rate it reached without the Bank's intervention.
Rachel Reeves MP, Shadow Chancellor of the Exchequer, said in response to the news: "Britain has been left worse off after thirteen years of economic chaos and instability under the Conservatives.
"Households coming off fixed rate mortgages will be paying an average of £220 more a month and inflation remains high because of the Conservatives’ disastrous mini-budget.
"Labour’s plan for the economy is about returning stability and boosting growth so we can cut household bills, create better paid jobs and make working people in all parts of the country better off."
The Bank had forecast inflation to reach 7.1% during the month.
It hikes interest rates to curb inflation, so the fact that inflation is lower than expected will have given decision-makers on the Monetary Policy Committee (MPC) more breathing room.
But experts at Investec Economics said that while headline and services inflation had both fallen below the August forecasts, growth in private sector pay had overshot the Bank's outlook significantly.
The bank had forecast that pay would rise 6.9% over three months compared to the year earlier. In fact, it appears to have risen 8.1%.
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