Bank of England Holds Interest Rates Amid Rising Inflation Fears

The Bank of England has decided to keep interest rates unchanged despite rising inflation. The decision was widely anticipated, with six members of the Monetary Policy Committee voting to keep rates at 3.25%, while three backed a quarter-point increase to 4%. This means that borrowing rates for personal loans and mortgages will remain the same.

The Bank's Governor, Andrew Bailey, indicated that it could raise interest rates soon to dampen inflationary pressures caused by the fallout of the Iran war. He stated, 'So far higher global energy costs have had a limited effect on price and wage setting in the U.K. But the longer this volatility persists, the bigger the impact it will have on inflation, and the more likely it is we will need to raise Bank Rate to ensure that inflation falls back to our 2% target.'

The minutes accompanying the decision showed that inflation is expected to rise to around 4% in the first quarter of next year from the current 3.1%. This would take inflation further above the bank's target rate of 2%. The Bank will meet again on November 5, and many economists believe this will be a natural moment for a change of course.