Bank of England holds interest rates at 4%
The Bank of England has left interest rates unchanged at 4%.
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Inflation remains at almost double its 2% target rate at 3.8%, and worries about food and wages inflation persist.
Last month the rate was cut from 4.25% to 4% Analysts predict that the rate will stay at 4% for the rest of the year.
The Bank of England said members of the Bank’s Monetary Policy Committee (MPC) voted 7-2 to keep rates on hold at 4%.Two policymakers, Swati Dhingra and Alan Taylor, were outvoted in calling for a quarter point cut to 3.75%.
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Food inflation is currently at 5.1% due to higher energy prices and minimum wage and National Insurance increases, as well as some poor harvests which have also contributed.
Governor Andrew Bailey said: “Although we expect inflation to return to our 2% target, we’re not out of the woods yet so any future cuts will need to be made gradually and carefully.”
The MPC said it was being cautious about cutting borrowing costs until it had more evidence that pressures on UK inflation were easing.
Consumer Prices Index (CPI) inflation stayed at 3.8% in August, official data showed on Wednesday, remaining at the highest level since the beginning of 2024 and above the Bank’s 2% target rate.
Food and drink inflation rose to 5.1%, the fifth month in a row that price rises had accelerated.
The MPC said evidence from its network of agents across the UK pointed to higher commodity prices, globally and in the UK, as accounting for much of the increase over the past year – particularly for beef, cocoa beans and coffee.
“Labour costs and costs associated with new packaging regulation had also accounted for some of the increase in food prices,” it wrote in the summary of its decision.