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The Bank of England has voted to keep interest rates unchanged at 3.75%.
This decision had been widely expected. The nine members of the Bank’s Monetary Policy Committee (MPC) voted 7-2 to hold the bank rate at current levels. The two dissenters voted for a 0.25 percentage point increase to 4%.
In its meeting notes, the MPC noted inflation had fallen since the last meeting, but that it was expected to rise later in the year, as higher energy costs feed through to consumers.
However, with a fast developing situation in the Middle East, a loosening labour market and signs of a weakening economy, the majority of the MPC felt the current base rate was still appropriate.
Current data proved supportive. The Office for National Statistics (ONS) update yesterday revealed inflation was 2.8% in May. This was level with April’s figures, and notably below the 3% generally expected by analysts.
Matching the US
The MPC decision also followed the US Federal Reserve making the same decision a day earlier.
Analysts were especially interested in the US decision, as it marked the debut of Fed chair Kevin Warsh. While a vote to keep rates unchanged was expected, of more interest was his decision to stop providing forward guidance alongside rate votes. Despite this, markets are still pricing in at least one rate hike in both the UK and US this year.
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