The Bank of England (BoE) maintained the U.K. interest rates at 4.25 percent on Thursday, citing a “highly unpredictable world” as the reason for this decision. The Bank’s nine-member Monetary Policy Committee (MPC) voted with a majority of six to three in favor of keeping rates unchanged.
Three committee members—Swati Dhingra, Dave Ramsden, and Alan Taylor—voted to lower the rate by 0.25 percentage points to 4 percent. Despite Thursday’s decision, the Bank emphasized that interest rates are on a “downward path.”
Andrew Bailey, the governor of the Bank of England, stated: “Interest rates remain on a gradual downward path, although we’ve left them on hold today. The world is highly unpredictable. In the U.K. we are seeing signs of softening in the labour market. We will be looking carefully at the extent to which those signs feed through to consumer price inflation.”
The last time the Bank cut interest rates was in May, when they were reduced by 0.25 percent to the current level of 4.25 percent.
U.K. consumer prices increased by 3.4 percent in May on an annualized basis, representing a rise of 0.8 percentage points compared to March. Economists have chosen to overlook the reading from April due to a correction in the Office for National Statistics data.
Read more: Bank of England slashes interest rates to 4.25 percent amid global trade uncertainty
Norway’s first rate cut since pandemic
In a similar move, Norway’s central bank has reduced interest rates by 25 basis points to 4.25 percent, marking the first cut since the onset of the Covid-19 pandemic. Norges Bank had indicated in March that it anticipated lowering its key sight deposit rate in June and has now followed through on that plan.
“Inflation has declined since the monetary policy meeting in March, and the inflation outlook for the coming year indicates lower inflation than previously expected,” stated Ida Wolden Bache, the central bank’s governor. “A cautious normalization of the policy rate will pave the way for inflation to return to target without restricting the economy more than necessary.”
The interest rate cuts were largely anticipated by economists.
