Bank of England

Governor Andrew Bailey explains today’s decision to hold interest rates at 5.25%.

We are holding interest rates steady at 5.25%. This will help to make sure that inflation gets back to the 2% target and stays there. The progress we are seeing in the key economic data is encouraging, but we are not yet at the point of cutting interest rates. We need to see more evidence that inflation will stay low before we can do that. https://lnkd.in/e99jbPEQ

Inflation is still above our 2% target. Petrol and utility prices have fallen since 2022, and some other prices are now rising much more slowly, including food prices. But prices of services – for example hotels and restaurants, insurance and rents – are still rising at rates well above past averages. Lower oil and gas prices mean that inflation is likely to drop to around 2% in coming months before rising slightly in the second half of the year. It should then settle back down again. We can’t rule out more global shocks that keep inflation high though. For example, developments in the Middle East could increase inflation by causing oil prices to rise. https://lnkd.in/e99jbPEQ

Our job is to make sure that inflation returns to our 2% target. We’ve been using higher interest rates for the past couple of years to help slow down price rises. Higher interest rates are working. Inflation in the UK has fallen to its lowest level since September 2021, from a peak of 11% in 2022 to 3.2% in March. Higher interest rates work by making it more expensive for people to borrow money and encouraging them to save. That means that, overall, they will tend to spend less. If people on the whole spend less on goods and services, prices will tend to rise more slowly. That lowers the rate of inflation. We know this means that many people are facing higher borrowing costs. But high inflation that lasts for a long time makes things worse for everyone. https://lnkd.in/e99jbPEQ

The Monetary Policy Committee voted by a majority of 7-2 to maintain #BankRate at 5.25%. Find out more in our #MonetaryPolicyReport: https://lnkd.in/e99jbPEQ

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