The Bank of England (BoE) announced it would maintain its interest rate at 5.25% for the second consecutive time, following a series of 14 rate hikes.
The monetary policy committee voted by a majority of 6-3 to maintain the bank rate yesterday (2 November), with three members preferring to increase the Bank Rate by 0.25 percentage points, to 5.5%.
The BoE's decision to keep interest rates unchanged is driven by inflationary pressures affecting UK businesses. It also aligns with recent moves by other central banks worldwide, including the US Federal Reserve and the European Central Bank, which have also opted to maintain their interest rates.
While the BoE has relied on interest rates as its primary tool to combat inflation, the central bank still faces challenges in reaching its 2% target by the end of 2025. The MPC anticipates that inflation will eventually fall below the target as reduced domestic inflationary pressures follow a period of economic slack.
Yesterday's decision highlights the ongoing struggle to manage inflationary pressures and their impact on the UK economy. This is evident in Q3 insolvency figures, which contributed to the highest corporate insolvency levels in over two decades.
Andrew Bailey, BoE governor said:
"Inflation is falling, and we expect it to keep falling this year and next. Our increases in interest rates are working to bring inflation back to the 2% target."
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