Bank of England Hits Pause on Interest Rate Hikes at 5.25%
The Bank of England has slammed the brakes on interest rate rises, holding steady at 5.25%. This ends a relentless run of 14 consecutive hikes as inflation shows signs of cooling in August.
End of the Rate Hike Marathon?
After pushing rates up 14 times in a row to tame soaring inflation, the Bank has decided to catch its breath. Borrowers faced steeper mortgage bills, but savers enjoyed fatter returns. The pause suggests the peak of increases might be behind us.
Bank of England Governor Andrew Bailey said: “Inflation has fallen a lot in recent months, and we think it will continue to do so. But there is no room for complacency. We need to be sure inflation returns to normal, and we continue to take the decisions necessary to do just that.”
A Divided Vote and Future Hikes Possible
This decision ends the longest streak of rate rises in recent Bank of England history—the last ‘no change’ vote was back in November 2021.
However, four Monetary Policy Committee (MPC) members—Jon Cunliffe, Megan Greene, Jonathan Haskel, and Catherine Mann—wanted to keep hiking rates. This hints more increases could be on the cards down the line.
Quantitative Easing Reversal Rolls On
Alongside freezing interest rates, the Bank confirmed it will carry on shrinking its £758 billion asset pile. It plans to offload £100 billion in government bonds over the next year, aiming to reduce total assets to £658 billion. This move tightens monetary policy further, even without rate hikes.
