Bank of England holds Bank Rate steady at 5%, urging sustainable path to target inflation

Sept. 19 (UPI) -- The Bank of England on Thursday held interest rates steady, saying it most work to reach its goal of 2% inflation in a sustainable way.

The Monetary Policy Committee voted 8-1 in favor of holding the Bank Rate at 5%, the dissenting member proposed a 0.25 percentage point cut.

"Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further," the Bank of England said in a statement.

In August Britain cut interest rates by a quarter point to 5%.

British inflation rates peaked at 11.1% in October 2022, went to 8% in August 2023, fell to 2.3% in April and declined further to 2% in May.

The bank concluded that for now, with global economic activity growth holding steady, a gradual approach to interest rates remains appropriate to reach the inflation goal.

The Bank of England said inflation in Britain is near the target rate of 2%, but an uptick is expected toward the end of 2024.

"Headline GDP growth is expected to return to its underlying pace of around 0.3% per quarter in the second half of the year," the Thursday bank statement said. "Twelve-month CPI inflation was 2.2% in August, and is expected to increase to around 2½% towards the end of this year as declines in energy prices last year fall out of the annual comparison."

The Monetary Policy Committee on Thursday also voted unanimously to reduce the stock of government bond purchases by $132.5 billion over the next 12 months to $739 billion.

The decision to hold rates steady in Britain follows Wednesday's decision by the Federal Reserve Bank in the United States to cut interest rates by a half point.

Fed Chair Jerome Powell said in a news conference after that cut was announced that the U.S. economy "is in a good place and our decision today is designed to keep it there."