The Bank of England has held interest rates at 5.25% for the seventh time in a row.
The decision to maintain the cost of borrowing comes despite official figures yesterday which revealed inflation had fallen to the Bank’s target of 2% for the first time in nearly three years.
However, the vote by members of its Monetary Policy Committee to maintain the current 16-year high in rates had been widely expected by economists and financial markets.
The Bank began steadily increasing rates in December 2021 as part of efforts to bring down inflation – which soared in the wake of the COVID pandemic and amid the war in Ukraine.
The recent spike in the pace of price rises peaked at 11.1% in October 2022 – the highest level since 1981.
While inflation has now come back down, officials remain concerned and fear it could tick up again later this year.
Wednesday’s figures from the Office for National Statistics (ONS) revealed that services inflation – which covers sectors such as the hospitality industry – had only fallen to 5.7% in May, less than expected.
The data prompted financial markets to push back their expectations of the Bank’s first rate cut of the year from August to September.
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The ONS said on Wednesday that the UK’s consumer prices index (CPI) rate of inflation, for the year to May, was the lowest since July 2021.
Officials said the drop was largely down to falling food prices, although the cost of motor fuel rose slightly.
The prospect of a rate cut this week was dealt a blow last month when wage growth – a driver of inflation – came in higher than expected.
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