BoE Keeps Rates Steady Despite Soaring Inflation Expectations

The Bank of England has decided to keep its main interest rate at 3.75% despite higher inflation, but financial markets expect an increase soon.

The decision was widely anticipated by economists, with six members of the Monetary Policy Committee voting to keep rates unchanged and three backing a quarter-point increase to 4%. The bank's Governor Andrew Bailey said that higher global energy costs have had a limited effect on price and wage setting in the U.K., but this volatility will eventually impact inflation.

Inflation is expected to rise to around 4% in the first quarter of next year from the current 3.1%, taking it further above the bank's target rate of 2%. The Bank of England's rate-setters meet again on November 5, and many economists believe this will be a natural moment for a change of course.

The decision has implications for personal loans and mortgages, as well as the British government's debt servicing costs. The government is set to unveil its annual budget before the next meeting, which could impact inflation expectations.