Bank of England Holds Fire on Interest Rates Amid Ongoing Inflation Concerns

UK Interest Rates Held at 4% as Bank Warns of Continued Inflation Pressures LONDON - The Bank of England's Monetary Policy Committee (MPC) decided to hold interest rates at 4%, a move that was widely expected given the recent surge in inflation. However, Governor Andrew Bailey warned that "we're not out of the woods yet" on inflation, indicating that the central bank remains cautious about trimming borrowing costs. The decision came as the Bank's latest forecast showed that inflation is likely to remain above its 2% target for the foreseeable future. Analysts had expected interest rates to be cut given the recent rise in prices, but Bailey said that the MPC was "not yet convinced" that a rate cut would be sufficient to bring inflation back under control. "We're not out of the woods yet," Bailey said at a press conference following the decision. "We need to see more evidence that inflation is coming down before we can consider cutting interest rates again." The Bank's decision to hold rates steady was in line with market expectations, but it marked a departure from the central bank's previous policy of cutting interest rates to stimulate economic growth. Since August last year, the MPC had cut interest rates five times as the pace of inflation eased. However, since April, inflation has been heading higher again, fueled by rising food costs and other price pressures. The Bank said that two members of the MPC had voted for a rate cut to 3.75%, but the majority of the committee opted to hold rates steady. The decision to hold interest rates at 4% was also influenced by concerns about the impact on government debt. The Bank announced that it would reduce its holdings of government debt at a slower pace, a move that is likely to be welcomed by investors who have been spooked by recent turmoil in financial markets. The MPC will meet again in August and November to discuss interest rates, and Bailey warned that any further cuts would depend on the outlook for inflation. "We need to see more evidence of a sustained decline in inflation before we can consider cutting interest rates again," he said. The Bank's decision to hold interest rates steady has been welcomed by some economists who argue that it will help to maintain economic growth and prevent a sharp slowdown in consumer spending. However, others have warned that the move could exacerbate inflation pressures and make it more difficult for households and businesses to access credit. In a statement, the Confederation of British Industry (CBI) said: "While we welcome the Bank's decision to hold interest rates steady, we urge policymakers to remain vigilant about the risks to growth and employment." The UK's decision to hold interest rates at 4% is in line with other major central banks around the world. The US Federal Reserve has also kept interest rates on hold, while the European Central Bank has signaled that it may cut rates later this year. As the global economy continues to navigate the challenges of rising inflation and slowing growth, policymakers will be closely watching the UK's interest rate decision for signs of what lies ahead. The Bank's next move on interest rates is expected to depend on the outlook for inflation, which is likely to remain a key focus for policymakers in the coming months. *Reporting by Bbc.*