Bank of England Keeps Interest Rates Unchanged at 5.25%

The Bank of England held its key interest rate steady at 5.25 per cent for the seventh consecutive time, ahead of elections scheduled for next month. The Monetary Policy Committee voted 7-2 to keep interest rates unchanged.

Deputy Governor Dave Ramsden and external MPC member Swati Dhingra were the only policymakers in favor of reducing rates to 5 per cent.

Andrew Bailey, BoE Governor stated that it was too soon to consider a rate cut even as the latest inflation data figures had returned to the 2 per cent target. "We need to be sure that inflation will stay low and that's why we've decided to hold rates at 5.25 per cent for now," he said.

The Bank of England's decision comes amidst a global trend of central banks holding interest rates steady. The US Fed also has kept its key interest rate unchanged at 5.25 per cent to 5.50 per cent for the seventh consecutive meeting.

The Reserve Bank of India (RBI) also took a similar stance by maintaining the repo rate at 6.5 per cent. While the ECB (European Central Bank) took a different turn calling for a cut for the first time since 2019.

Interestingly, market observers believed that the Bank of England was unlikely to lower rates before September or November. However, according to a recent Reuters poll of economists, many expected a rate cut on August 1 following the BoE's next decision.

This cut may come too late for Prime Minister Rishi Sunak, as his Conservative Party trails the opposition Labour Party by nearly 20 points in pre-election polls.

As per a report by Reuters, while inflation has seen a declining trend since he took office in October 2022, the Labour Party holds the Conservatives' former leader Liz Truss responsible for high mortgage rates.