Bank of England set to hold interest rates at 15-year high

London: The Bank of England is set to join its peers in the US and Europe in keeping borrowing rates unchanged at its policy meeting Thursday despite mounting worries over the state of the British economy.

The central bank is expected to keep its main interest rate at a 15-year high of 5.25 per cent, where it has stood since August. Holding that high rate follows two years of hikes that targeted a surge in inflation, first stoked by supply chain issues during the coronavirus pandemic and then Russia’s invasion of Ukraine, which pushed up food and energy costs. Its decision comes during a busy pre-Christmas bout of central bank activity, with the US Federal Reserve and the European Central Bank also set to keep their main borrowing rates on hold at multi-year highs.

The Bank of England is widely thought to be further away from cutting rates than the Fed or the ECB, with inflation in the UK higher than in the US or across the 20 European Union countries that use the Euro currency. The Bank of England has managed to get inflation down from a four-decade high of over 11 per cent — but there’s still a way to go for it to get back to its 2 per cent target.

Inflation, as measured by the consumer price index, stood at 4.6 per cent in the year to October, still too high for comfort. While the interest rate increases have helped in the battle against inflation, the squeeze on consumer spending, primarily through higher mortgage rates, has weighed on British economic growth.