Bank Of England Set To Keep Interest Rates On Hold

LONDON, Feb 5 (Bernama-PA Media/dpa) -- The Bank of England is expected to hold interest rates at 3.75 per cent as policymakers face a "balancing act" of controlling inflation and supporting economic growth, reported PA Media/dpa.

Most economists think the Bank's Monetary Policy Committee (MPC) will opt to leave rates unchanged at its next decision on Thursday.

The MPC delivered a cut to borrowing costs before Christmas, from 4 per cent to 3.75 per cent, marking the fourth reduction of the year.

Governor Andrew Bailey said at the time that the UK had "passed the recent peak in inflation and it has continued to fall," but he cautioned that further cuts will be a "closer call."

Since that decision, official data has shown that inflation bounced back in December, rising for the first time in five months.

The rate of Consumer Prices Index (CPI) inflation came in at 3.4 per cent for the month, up from 3.2 per cent in November, with tobacco duties and airfares among the factors driving prices higher.

Economists think this inflation reading will encourage policymakers to keep rates on hold this month.

Laith Khalaf, head of investment analysis for AJ Bell, said: "It's extremely unlikely the Bank of England is going to do anything but hold interest rates where they are at its February meeting.

"The Bank reduced rates in December and has clearly indicated it wants to adjust policy gradually, so consecutive cuts are pretty much unthinkable in the current economic environment."

He said that the Bank of England will look through one-off factors pushing up prices in December, but that there were "lingering inflation fears" within the committee.

--BERNAMA-PA MEDIA/dpa