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Bank of England is set to hold interest rates at a 15-year high despite worries about the economy
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Date:2025-04-12 11:28:29
LONDON (AP) — The Bank of England is set to join its peers in the U.S. and Europe in keeping borrowing rates unchanged at its policy meeting Thursday despite mounting worries over the state of the British economy.
The central bank is expected to keep its main interest rate at a 15-year high of 5.25%, where it has stood since August. Holding that high rate follows two years of hikes that targeted a surge in inflation, first stoked by supply chain issues during the coronavirus pandemic and then Russia’s invasion of Ukraine, which pushed up food and energy costs.
Its decision comes during a busy pre-Christmas bout of central bank activity, with the U.S. Federal Reserve and the European Central Bank also set to keep their main borrowing rates on hold at multiyear highs.
The Bank of England is widely thought to be further away from cutting rates than the Fed or the ECB, with inflation in the U.K. higher than in the U.S. or across the 20 European Union countries that use the euro currency.
The Bank of England has managed to get inflation down from a four-decade high of over 11% — but there’s still a way to go for it to get back to its 2% target. Inflation, as measured by the consumer price index, stood at 4.6% in the year to October, still too high for comfort.
While the interest rate increases have helped in the battle against inflation, the squeeze on consumer spending, primarily through higher mortgage rates, has weighed on British economic growth.
Figures on Wednesday showing that the British economy contracted by 0.3% in October from a month earlier have fueled concerns about the near-term outlook on growth, especially as many households have yet to feel the impact of higher mortgage rates.
“The poor performance on the U.K. economy in October will inevitably reignite speculation about whether the country is back in recession,” said James Smith, research director at the Resolution Foundation. “But what’s not beyond doubt is that Britain is a stagnation nation — the 0.5% growth over the past 18 months is the weakest outside of a recession on record.”
High interest rates and low economic growth are hardly the ideal backdrop for the governing Conservative Party in next year’s general election, which opinion polls suggest it will lose to the main opposition Labour Party.
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