From CNBC · Chloe Taylor · · 1m 50s
Bank of England holds steady as inflation climbs
The Bank of England kept rates at 3.75% despite UK inflation rising to 3.1%, defying rate hikes from the Fed and ECB.
In brief
The Bank of England kept rates at 3.75% despite UK inflation rising to 3.1%, defying rate hikes from the Fed and ECB. The Bank of England is taking a wait-and-see approach to inflation, holding rates steady for now but signaling a likely hike in November as global energy shocks persist. Originally reported by CNBC.
Bank of England holds rates at 3.75%
The Monetary Policy Committee voted 6-3 to keep the Bank Rate unchanged on Thursday, despite inflation rising above its 2% target.
Three dissenters wanted a rate hike
Three MPC members voted to raise rates by 25 basis points to 4%, citing inflation risks from the Iran war and geopolitical uncertainty.
UK inflation hits 3.1% in August
UK consumer price inflation rose to 3.1% in August, its first jump above 3% since March, driven largely by motor fuel costs surging 23% year-on-year.
Governor warns of persistent volatility
Andrew Bailey cautioned that the longer energy volatility persists, the bigger the impact on inflation and the more likely rate hikes become necessary.
“The longer this volatility persists, the bigger the impact it will have.”
Markets expect November rate hike
Markets are pricing in a 76% chance of holding rates this week, but a hike of at least 25 basis points is widely anticipated at the November meeting.
Bank diverges from Fed and ECB
The Fed hiked rates on Wednesday for the first time since 2023, while the ECB announced its second hike this year. The Bank of Japan is also expected to raise rates Friday.
UK gilt yields fall after decision
The 10-year gilt yield dropped 8 basis points to 5.22%, while 30-year yields fell nearly 12 basis points to 5.74% following the rate hold announcement.
Labour market softening, inflation resilient
While headline inflation is rising, the UK labour market is weakening and core inflation remains stable, giving the Bank room to wait before hiking.
What to remember
The Bank of England is taking a wait-and-see approach to inflation, holding rates steady for now but signaling a likely hike in November as global energy shocks persist.
