The United Kingdom Central Bank Bank of England (BOE) said on the 5th (local time) that the Monetary Policy Committee (MPC) decided to keep the base rate unchanged at 3.75%.
The BOE has cut the base rate six times since August last year. The 3.75% base rate is the lowest in 2 years and 10 months.
Of the nine monetary policy committee members, five favored holding rates and four voted for a 0.25 percentage point (p) cut to 3.5%. BOE Governor Andrew Bailey supported holding rates.
In a statement, Governor Bailey said, "We decided to hold rates today because we must prevent inflation from rising," and "if all goes well, there will be an opportunity to cut the base rate further this year." In its overall statement, the BOE also said that while the United Kingdom's consumer price index (CPI) inflation rate is above the 2% target, it is expected to fall close to the target starting in April.
Members who voted to hold rates were concerned that cutting too quickly before inflationary pressures ease risks making currency policy excessively accommodative, and that reversing course in that case could involve a large expense.
By contrast, members who supported a rate cut said the risk of persistent inflation had eased considerably and argued that currency policy remains overly restrictive.
In December last year, the United Kingdom's consumer price index (CPI) inflation rate was 3.4%, well above the Bank of England's 2% target. Both the United Kingdom's inflation rate and base rate are the highest among the Group of Seven (G7).
The BOE on this day forecast the United Kingdom's gross domestic product (GDP) growth for this year at 0.9%, down from the 1.2% projection in November last year. Next year's economic growth forecast was also lowered to 1.5% from 1.6%.