The pause comes after 14 consecutive rate hikes and follows yesterday’s lower-than-expected inflation figures.
The Bank of England halted its run on interest rates today, with borrowing costs remaining at 5.25%.
It’s the first pause in nearly two years, following 14 consecutive hikes.
Investors and financial markets have been teetering in anticipation of the decision, with some investors betting on a 50% chance of a rate hike pause.
The decision comes a day after August’s Consumer Price Index (CPI), i.e. inflation, came in lower than expected.
The surprise inflation rate clocked in at 6.7% in August, beating economist predictions of 7.1%. It’s also a notch down from July, which saw a CPI of 6.8%.
Today’s interest rates are still high and are roughly on par with the Bank’s rates in the run up to the 2008 financial crisis, which saw rates of 5.25% in February 2008.
Read more: UK inflation unexpectedly drops to 6.7%
While inflation remains high, it’s an improvement on October 2022, which saw an eye-watering CPI value of 11%.
Inflation is still nonetheless three times higher than the Bank’s goal of 2%, and is the highest in the G7 economic area, provoking strong criticism from the Shadow government.
Kitty Ussher, the chief economist at the Institute of Directors, told The Guardian yesterday that, “Previous rate rises are working to tackle inflation. And if the medicine is working, you need to give it time to avoid risking an overdose.”
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