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The Bank of England has voted to leave interest rates on hold at 4%, but a knife-edge split on its Monetary Policy Committee suggests a cut may be coming very soon.
The nine members of the Bank’s MPC voted 5-4 in favour of leaving borrowing costs unchanged, in the face of higher-than-usual inflation in recent months.
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The Bank’s chief mandate is to keep inflation – the rate at which prices have changed over the past year – as close as possible to 2% and, all else equal, higher interest rates tend to bring down prices.
However, consumer price index inflation was at 3.8% in September, higher than anywhere else in the G7 group of industrialised nations.
However, unveiling a new set of economic forecasts today, the Bank said it expects inflation has now peaked, and will drop in the coming months, settling a little bit above 2% in two years’ time.
The Bank’s decision comes only three weeks ahead of the budget, which will lead some to suspect that it held off a rate cut so it could reassess the state of the economy post-budget.
The chancellor has signalled that she is likely to raise taxes and trim back her spending plans – something that could further dampen economic growth.
The governor, Andrew Bailey, said: “We held interest rates at 4% today. We still think rates are on a gradual path downwards but we need to be sure that inflation is on track to return to our 2% target before we cut them again.”
The Bank said that, so far at least, tariffs had contributed to slightly lower than expected inflation.
It said it expected gross domestic…
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