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Bank of England keeps interest rates steady at 15-year high

The Bank of England kept interest rates at a 15-year high, sticking with its message that borrowing costs will remain elevated for some time despite growing bets on a wave of cuts in 2024.

The Monetary Policy Committee voted 6-3 to keep its key policy rate at 5.25 per cent for the third consecutive meeting, according to minutes of the decision released Thursday.

The UK central bank’s decision contrasted with the US Federal Reserve’s admission last night that reductions were on the agenda. The BOE reiterated its policy will be “sufficiently restrictive for sufficiently long” to curb inflation. Officials split along the same lines as in their previous meeting in November, with three still supporting a hike.

Governor Andrew Bailey said in a statement released alongside the decision that “there is still some way to go” in the fight to control inflation. The MPC repeated its guidance that it could hike again “if there were evidence of more persistent inflationary pressures,” with price growth still more than double the 2 per centtarget.

Bailey pushed back against growing expectations on markets that the BOE will pivot to rate cuts as soon as May.

“Markets have to form a view, they must do that of course,” he said in an interview with broadcasters following the BOE’s decision on Thursday. “At the moment, we are more cautious because we need to see those more persistent elements of inflation, which we see in things like services prices, turn in the right direction quite decisively.”

The MPC’s conclusion is the latest indication that the BOE will trail the Fed and European Central Bank in easing off on its monetary tightening. Britain still has the strongest inflation rate in the Group of Seven nations, with a smaller workforce than at the start of the pandemic and wage rises fanning upward pressure on prices.

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