Bank of England Keeps Interest Rate at 3.75% Amid Inflation Concerns

The Bank of England has decided to keep its main interest rate at 3.75% despite higher inflation. This decision was widely anticipated, and six members of the Monetary Policy Committee voted to keep rates unchanged while three backed a quarter-point increase to 4%. The bank's Governor Andrew Bailey noted that so far, higher global energy costs have had a limited effect on price and wage setting in the UK.

However, Bailey warned that if this volatility persists, it will have a bigger impact on inflation. The bank expects inflation 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 of England's decision to keep interest rates on hold comes after the US Federal Reserve raised borrowing costs again on Wednesday. The minutes accompanying the Bank of England's decision show that households face another increase in domestic energy bills, which will contribute to higher inflation.