Bank of England Holds Rate at 3.75% Despite Accelerating Inflation — CNBC — CNBC Top News
The Bank of England in the United Kingdom left its key interest rate unchanged at 3.75%, although annual inflation in the country accelerated to 3.1% in August and exceeded the regulator's 2% target. CNBC Top News reports.
Inflation exceeded 3%
According to the UK's Office for National Statistics, the August reading was the first time inflation exceeded 3% since March. The agency attributed a significant part of the acceleration in inflation to rising motor fuel costs: prices increased by 23% year on year.
The United Kingdom is a net energy importer and is therefore vulnerable to external price shocks in energy markets. The country is also continuing to overcome a cost-of-living crisis that emerged amid post-COVID-19 inflation and the impact of Russia's war against Ukraine on natural gas supplies.
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Market expectations
According to LSEG data, ahead of the meeting markets put the probability of keeping the rate at its current level at 76%. At the same time, market participants widely expect an increase of at least 25 basis points at the Bank of England's next meeting in November.
The UK regulator has not changed rates this year. It last adjusted them in December, cutting them by 25 basis points. The decision to keep the rate differs from the actions of other major central banks: the U.S. Federal Reserve raised its rate by a quarter of a percentage point, while the European Central Bank announced its second increase this year last week.
J.P. Morgan Personal Investing investment strategist Scott Gardner said that August's acceleration in inflation was unlikely to prompt the Bank of England to raise rates immediately, but it could heighten officials' concerns about the inflation outlook.
