Bank of England Holds Rates Amid Inflation Dip, Sparks Policy Debate

The Bank of England decided to maintain its main interest rate at 5.25%, the highest in 16 years, despite reaching its inflation target of 2%. Policymakers warned against premature cuts that could reignite price rises, leading to a split vote. The decision precedes a crucial general election.

The Bank of England on Thursday decided to keep its main interest rate at a 16-year high of 5.25%, even though inflation has fallen to its target of 2%. Several policymakers cautioned that an early rate cut could lead to another spike in prices.

A split within the nine-member Monetary Policy Committee showed seven voting for no change and two supporting a reduction. This outcome mirrored last month's vote as interest rates have remained steady since August following a series of hikes.

The accompanying statement revealed differing opinions on inflation's future, particularly in the services sector, which is central to the British economy. "It's good news that inflation has returned to our 2% target," said Bank of England Governor Andrew Bailey. "We need to ensure inflation stays low, so we've decided to hold rates at 5.25% for now."

This decision may disappoint the governing Conservative Party ahead of the UK's general election in two weeks, where the Labour Party led by Keir Starmer is expected to win. An interest rate cut would have provided Prime Minister Rishi Sunak with favorable economic news, potentially reducing mortgage rates as well.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)