Following news of yet another drop in inflation to 6.7%, the Bank of England (BoE) voted to maintain the current interest rate at 5.25%, bucking the trend of increasing interest rates that began in late 2021.
Members of the Monetary Policy Committee (MPC) voted 5-4 to keep interest rates at 5.25%. Four members preferred to increase Bank Rate by 0.25 percentage points, to 5.5%.
In its announcement, the MPC argued that its vote came down to the fact that "twelve-month CPI inflation fell from 7.9% in June to 6.7% in August, 0.4 percentage points below expectations at the time of the Committee's previous meeting," and it has projected that CPI inflation will continue to fall in the short term.
As in previous announcements, the MPC reiterated its promise to "monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole" in a bid to reach its 2% inflation target.
Commenting on the news, Jeremy Hunt was positive that the government and BoE's plan of tackling inflation was working, saying: "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."
Today's decision also differs from those made both in the Eurozone and the US Federal Reserve, which committed to rises of 4% and 5.25% respectively.
The announcement marks a step change from the previous 14 announcements, where the Bank of England had incrementally increased the base rate each time. While the BoE has held off from ratcheting up the interest rate dial again, it has still left the current figure of 5.25% at its highest level since 2008.
A knife's edge
Nerves were shredded across the UK economy in the run-up to the announcement, as investors slashed bets on a rise the day before due to a lower than expected increase in inflation during August and BoE governor Andrew Bailey casting doubts on further increases.
Today's announcement has confirmed rumours that the BoE is finally at the end of its current tightening cycle. Giving evidence to MPs earlier this month, governor Andrew Bailey said that the UK is "much nearer the top of the cycle", while MPC member Swati Dhingra argued that rates had already gone too far.
Making a dent
With inflation currently sitting at 6.7%, down from a peak of 11.1% in October of last year, the BoE is likely feeling justified in its recent aggressive approach to its interest rate increases. However, its target of 2% inflation is still some way off.
Before the announcement, Chancellor of the Exchequer Jeremy Hunt struck a positive tone when interviewed by Sky News, noting: "If you look at the overall picture since inflation peaked it is now down 40% - and that says the plan is working.
"But even at 6.7% that is a lot for ordinary families... which is why it is essential to stick to that plan."
Talk to us about your finances.