LONDON (AP) 鈥� The Bank of England on Thursday paused nearly after a surprising fall in U.K. inflation eased concerns about the pace of price rises.
In a development that few predicted just two days ago, the central bank kept its main interest rate unchanged at a 15-year high of 5.25%. It comes to the relief of millions of .
Central banks worldwide appear to be near the end of an aggressive rate-hiking cycle meant to curb an outburst of inflation triggered by the bounceback from the COVID-19 pandemic and Russia鈥檚 war in Ukraine. The Wednesday.
Clearly influencing the U.K. bank鈥檚 decision was news Wednesday that in August, its lowest level since Russia invaded Ukraine in February 2022.
Four of the nine members of the Monetary Policy Committee voted for a hike. The five who voted to keep rates on hold said inflation had been 鈥渓ower than had been expected鈥� but that the decision was 鈥渇inely balanced,鈥� according to minutes from the meeting.
Those who backed a quarter-point hike said the surprise drop in inflation was due to one-off factors and judged that overall there was evidence of more 鈥減ersistent inflationary pressures.鈥�
Inflation is still way above the bank鈥檚 target rate of 2% and higher than in any other Group of Seven major economy. With that in mind, the bank indicated that borrowing rates won't be cut anytime soon.
鈥淢onetary policy would need to be sufficiently restrictive for sufficiently long to return inflation to the 2% target,鈥� the bank said. 鈥淔urther tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.鈥�
Higher interest rates, which cool the economy by making it more expensive to borrow and bearing down on spending, have contributed to bringing down inflation worldwide. Though most economies have avoided falling into recession, in many parts of the world.
While the decision to leave rates unchanged is a welcome development, it doesn't mean that has ended. Inflation, though lower than expected, remains relatively high, as do .
And because there is a lag between actual rate hikes and mortgage rates, lots of homeowners and renters have yet to see increases in their housing costs.
Unlike in the U.S., for example, most homeowners in Britain lock in mortgage rates for only a few years, so those whose deals expire soon know that they face much higher borrowing costs in light of the sharp rise in interest rates over the past couple of years.
The Bank of England, like other central banks, has raised interest rates aggressively from near zero as it sought to counter price rises first stoked by supply chain issues during the coronavirus pandemic and then Russia鈥檚 invasion of Ukraine, which pushed up . U.K. inflation hit a peak of 11.1% in October 2022.
As inflation has eased, the hiking cycle looks to be nearing an end.
The Swiss National Bank also kept rates unchanged Thursday, but in a busy day for central bank action in Europe, pushed ahead with quarter-point hikes.
, which sets interest rates for the 20 European Union countries that use the euro currency, last week hinted that its 10th straight hike could be its last.
Pan Pylas, The Associated Press
