The Bank of England's Monetary Policy Committee (MPC) voted to keep interest rates unchanged at 1.25% on Thursday, marking the seventh consecutive meeting without a change. The decision comes as inflation has fallen to 2%, the target set by the Bank, but remains above the pre-pandemic level of 1.7%.
The Bank of England's decision to hold rates steady comes as a surprise to some economists, who had expected a rate cut in light of the recent slowdown in inflation. However, the MPC has expressed concerns that the economy is still vulnerable to external shocks, such as the ongoing trade tensions between the US and China and the uncertainty surrounding Brexit.
In its latest Inflation Report, the Bank forecasts that inflation will continue to fall in the coming months, reaching 1.8% by the end of the year. However, the MPC also warns that there are still upside risks to inflation, particularly from rising oil prices and a weaker pound.
Bank of England Leaves Rates Unchanged Despite Falling Inflation
The Bank's decision to keep rates on hold is likely to be welcomed by businesses, who have been calling for stability and predictability in interest rates. However, it may disappoint savers, who have seen their returns on deposits decline in recent years.
The MPC's next meeting is scheduled for August 1, when it will have more data on the economy and inflation to consider. If inflation continues to fall and the risks to the economy recede, the Bank could cut rates later this year. However, if inflation remains stubbornly high or the economy shows signs of overheating, the Bank could be forced to raise rates again.
The Bank of England's decision to keep rates unchanged is a sign that the MPC is taking a cautious approach to monetary policy. The MPC is balancing the need to keep inflation under control with the need to support economic growth. The Bank's decision will be closely watched by economists and investors, who will be looking for clues about the future direction of interest rates.
In addition to the MPC's decision on interest rates, the Bank also announced a number of other measures, including:
* A reduction in the size of its quantitative easing program from £445 billion to £435 billion.
* A new Term Funding Scheme (TFS) to provide low-cost funding to banks for lending to businesses.
* A new Credit Easing Facility (CEF) to provide funding to businesses that are struggling to access credit from traditional sources.
These measures are designed to support economic growth and ensure that businesses have access to the funding they need to invest and create jobs. The Bank of England's decision to keep rates unchanged and announce a number of new measures is a sign that the Bank is committed to supporting the UK economy.
