Bank of England holds interest rates at 3.75% but warns war could force future rises
Central bank announces surprise plan to sell billions of pounds in government bonds back to the Treasury • Business live – latest updates The Bank of England has kept interest rates on hold as it warned a continuation of the bitter fighting in the Middle East could force it to raise borrowing costs amid mounting fears over inflation. It also announced a surprise plan to sell billions of pounds in UK government bonds back to the Treasury to avoid fuelling turbulence in the gilt market, a decision that could have significant consequences for the public finances before next month’s budget. Continue reading...
Policymakers keep steady course as jobs market comes under strain and Iran war pushes up energy costs
The Bank of England has kept interest rates on hold despite growing concern over inflation as the Iran war pushes households into a fresh cost of living crisis.
Against a volatile backdrop in global markets as the fighting in the Middle East intensifies, the Bank’s monetary policy committee (MPC) voted to keep its key base rate at 3.75%.
Financial markets expected Threadneedle Street would keep borrowing costs unchanged as policymakers grapple with the worsening global energy shock at a time when the domestic jobs market is coming under strain.
Official figures on Wednesday show UK inflation rose to 3.1% in August from 2.9% in July as the escalating hostilities in the Middle East drove up the average price of petrol and diesel by almost a quarter, hitting households already squeezed by years of fast-rising prices for everyday essentials. The Bank of England’s inflation target is 2%.
The sharp rise in global energy prices prompted the US Federal Reserve to raise interest rates on Wednesday for the first time since 2023, after a decision last week by the European Central Bank to raise eurozone borrowing costs.
With the Bank under pressure to guard against high rates of inflation becoming entrenched in the UK economy, City traders predict a quarter-point rise in borrowing costs from as early as November and three more increases to 4.75% next year.
It comes after Andy Burnham said he was prepared to take “difficult decisions” to tackle high inflation and keep the economy on track and would take action at next month’s budget on the cost of living.