Interest rates held as Bank warns of impact of high energy prices
Uncertainty over the impact of high energy prices has led policymakers at the Bank of England to hold interest rates at 3.75%. It is the
Uncertainty over the impact of high energy prices has led policymakers at the Bank of England to hold interest rates at 3.75%. It is the fourth meeting in a row that the Monetary Policy Committee (MPC) has decided to leave rates unchanged. Bank governor Andrew Bailey said recent drops in oil prices were "encouraging" but high energy prices during the war had still left "inflationary pressure in the pipeline".
The base rate is the primary tool used to control inflation and influences the cost of borrowing as well as the interest paid to savers. The latest hold comes as the situation in the Middle East continues to be watched closely. Policymakers said that oil prices remained higher than before the conflict and had "continued to be volatile". However, they said inflation expectations by the end of the year were now lower than the Bank had thought in April.
Interest rate policy, to maintain low inflation, would depend on the "scale and duration" of the energy price shock and how much that filtered through to the wider economy through prices and wage demands, they said. "Oil prices have fallen in recent days, and that's encouraging," Bailey said. "Whatever happens in the future, the higher energy prices of the past four months mean there's already some inflationary pressure in the pipeline.
"The Bank's job is to make sure that doesn't turn into sustained inflation above our 2% target."
The BriefWire