The Bank of England (BoE) made a significant decision on Thursday by maintaining its key interest rate at a 16-year high, despite ongoing concerns about elevated inflation levels, which have seen recent slowdowns.
BoE Governor Andrew Bailey hinted at a potential rate reduction later in the year, indicating that inflationary pressures are gradually easing.
Bailey emphasized that although the economy is not yet ready for rate cuts, positive developments are underway.
The BoE opted to keep its key rate unchanged at 5.25 percent, echoing a similar move by the US Federal Reserve a day earlier.
This decision followed recent data indicating a slowdown in UK annual inflation for February, which was lower than anticipated. Speculation had risen regarding potential rate cuts by the central bank in the upcoming summer months.
In February, inflation reached a near 2.5-year low of 3.4 percent, driven by easing food prices. This marked a significant decrease from January’s 4.0 percent and surpassed expectations of 3.5 percent. However, despite the improvement, inflation remains persistently above the BoE’s two-percent target.
With the current interest rate standing at 5.25 percent, borrowers may face challenges, while savers could benefit from increased returns, as the rate remains at its highest level since February 2008.
