BOE Keeps Interest Rates Unchanged, Eyes November Hike

The Bank of England has decided to keep interest rates unchanged at its latest meeting, despite rising inflation and growing expectations that it will raise borrowing costs soon. The decision was widely anticipated by economists, with six members of the Monetary Policy Committee voting to keep rates steady while three backed a quarter-point increase to 4%. Financial markets believe it's more likely than not that the bank will raise interest rates at one of its next two policy meetings in November or December.

Bank Governor Andrew Bailey acknowledged that higher global energy costs have had a limited effect on price and wage setting in the UK so far, but warned that this volatility could persist and impact inflation. He noted that households face another increase in their domestic energy bills, which will take inflation further above the bank's target rate of 2%. Inflation is now expected to rise to around 4% in the first quarter of next year from the current 3.1%, according to the minutes accompanying the Bank of England's decision.

Economists believe that the bank's next meeting on November 5 will be a natural moment for a change of course, as they will have the latest quarterly economic forecasts and Bailey will hold a press briefing. This would mark the start of a hiking cycle, according to Felix Feather, an economist at asset management firm Aberdeen.