FILE - View at the Bank of England, at the financial district in London, Thursday, May 11, 2023. The Bank of England is set to join its peers in the U.S. and Europe in keeping borrowing rates unchanged at its policy meeting Thursday, Dec. 14 despite mounting worries over the state of the British economy. (AP Photo/Frank Augstein, File)
LONDON (AP) – The Bank of England kept borrowing rates unchanged Thursday despite mounting worries over the state of the British economy, and it showed little sign that it is contemplating cutting them anytime soon – unlike the U.S. Federal Reserve.
The central bank left its main interest rate at a 15-year high of 5.25%, where it has stood since August following the end of nearly two years of hikes. Six of the nine members of the Monetary Policy Committee voted to keep rates on hold while three wanted a quarter-point hike.
While the interest rate increases have helped in the battle against inflation, the squeeze on consumer spending, primarily through higher mortgage rates, has weighed on British economic growth.
On Wednesday, the U.S. Federal Reserve also kept rates on hold. The European Central Bank, which sets policy for the 20 European Union countries that use the euro currency, is expected to do the same Thursday.
The Fed also signaled that it expects to make three interest rate cuts next year, while market expectations also foresee cuts by the ECB.
But that looks a ways off for the Bank of England.
In its statement Thursday, the bank said monetary policy would need to be “sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term.”
Holding that high rate follows two years of hikes that targeted a surge in inflation, first stoked by supply chain issues during the coronavirus pandemic and then Russia’s invasion of Ukraine, which pushed up food and energy costs.
The Bank of England has managed to get inflation down from a four-decade high of over 11% – but there’s still a ways to go for it to get back to its 2% target.
Inflation, as measured by the consumer price index, stood at 4.6% in the year to October, still too high for comfort.
High interest rates and low economic growth are hardly the ideal backdrop for the governing Conservative Party in next year’s general election, which opinion polls suggest it will lose to the main opposition Labour Party.
