The Bank of England has elected to hold interest rates at their current levels a day after the U.S. Federal Reserve lowered rates by 50-basis points.
The Bank of England previously cut interest rates by 25-basis points in August of this year.
However, central bank officials in the United Kingdom (U.K.) voted in favor of holding rates steady amid uncertainty about the direction of both inflation and the British economy.
In a news release, the Bank of England said that it was taking a “gradual approach” to interest rate reductions.
Inflation across the U.K. is near the central bank’s 2% target but price rises in services, which account for 80% of the economy, came in higher at an annualized rate of 5.6% in August.
At the same time, the economy remains sluggish and is expected to grow only about 0.3% in this year’s second half.
The Bank of England’s decision to hold interest rates at current levels comes a day after the U.S. Federal Reserve lowered interest rates by 50-basis points, its first reduction since the Covid-19 pandemic struck four years ago.
The British central bank’s decision to hold ran counter to the consensus view of economists who expected another 25-basis point interest rate cut at the September policy meeting.
The Bank of England’s benchmark overnight interest rate remains at 5%. The central bank’s next decision on interest rates is scheduled to take place on Nov. 7.
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