Bank of England Holds Interest Rate at 5 Percent

The Bank of England (BoE) has left UK interest rates unchanged at 5 percent, maintaining its restrictive monetary policy position.
The BoE is cautious about slashing the interest rates “too fast or by too much.” The bank has long stressed that it will keep the monetary policy restrictive for as long as it takes for the inflation to “sustainably” remain at the 2 percent target.
“If that continues, we should be able to reduce rates gradually over time. But it’s vital that inflation stays low, so we need to be careful not to cut too fast or by too much,” he added.
Eight MPC members, who preferred to hold interest rates, think that a gradual approach to easing rates is necessary.
The committee had a range of views on whether expectations of stabilising inflation, coupled with BoE’s restrictive stance, would lead to further easing in underlying domestic inflationary pressures. The majority of MPC members noted that weaker demand for oil is leading to fall in prices and warrants their need for caution.
Only one member, Swati Dhingra, voted to reduce rates to 4.75 percent because she thought that the firm downward trajectory of inflation warranted a less restrictive approach.
The Fed said it had “gained greater confidence that inflation is moving sustainably toward 2 percent” and noted that while the unemployment rate has moved up, it remains low.
“We still expect the bank rate will reduce this year, however this is happening much later and slower than we had anticipated earlier in the year,” he said.