BoE Keeps Rates Steady, but Hike on Horizon Amid Rising Inflation

The Bank of England (BoE) has left its benchmark interest rate unchanged at 3.75% in a meeting on Thursday, despite rising inflation in Britain. The decision was widely anticipated, with six members of the Monetary Policy Committee (MPC) voting to keep rates steady and three backing a quarter-point increase.

Although borrowing rates were kept on hold, financial markets expect the bank to raise interest rates at one of its next two policy meetings, either in November or December. BoE Governor Andrew Bailey said that while global energy costs have had a limited effect on price and wage setting in the U.K., '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 BoE's decision showed that inflation is expected to rise to around 4% in the first quarter of next year from the current 3.1%, as households face another increase in their domestic energy bills.