LONDON (AP) — The Bank of England has kept its main interest rate unchanged at the 15-year high of 5.25%, as inflation across the U.K. is expected to fall further over the coming months.
In a statement Thursday, the bank’s nine-member Monetary Policy Committee indicated that inflation, as measured by the consumer price index, is set to fall toward a 2% target rate over the coming year. In the year to September, inflation stood at 6.7%.
Most economists expect a sizable decline over coming months as domestic energy bills fall.
The bank in September ended a nearly two-year run of interest rate rises. The U.S. Federal Reserve and the European Central Bank have also held interest rates over the past week.
The Bank of England, like other central banks, raised interest rates aggressively from near zero as it sought to counter price rises first stoked by supply chain issues during the coronavirus pandemic and then Russia’s invasion of Ukraine, which pushed up food and energy costs.
Higher interest rates, which cool the economy by making it more expensive to borrow and bearing down on spending, have contributed to bringing down inflation worldwide.
Though most economies have avoided falling into recession, fears remain that the British economy could start to see output shrinking in coming months, hardly the best backdrop for the governing Conservative Party ahead of a general election.