Bank of England Holds Interest Rates at Record Lows

Britain’s central bank said it would wait for more data on the labor market even as inflation is expected to climb to about 5 percent.


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The Bank of England edges closer to rising interest rates, but holds steady.

The Bank of England building in London. Britain’s annual inflation rate reached 3.1 percent in September and is expected rise higher in coming months.Credit…Andrew Testa for The New York Times

Nov. 4, 2021, 8:07 a.m. ET

The Bank of England held interest rates at record low levels on Thursday, defying market expectations for a rate increase to tackle rising inflation. But the central bank said inflation would peak at about 5 percent in April, “materially higher” than its previous expectations, and signaled that rate rises were likely to be necessary in the coming months.

If so, it would join other central banks pulling back on emergency levels of monetary stimulus as supply chain disruptions, higher energy prices, labor market shortages push up prices around the world.

The Bank of England is still expected to be the first major central bank to raise rates. On Wednesday, the Federal Reserve said it would begin winding down its enormous bond-buying program this month as prices continue to rise, eventually putting it in a position to raise rates in the middle of next year.

Like other central banks, the Bank of England insists that the current bout of high inflation will be “transitory,” but it’s becoming increasingly unclear how long it will last.

Investors had been primed for an increase of 15 basis points, or 0.15 percentage points, that would have taken interest rates to 0.25 percent from 0.1 percent. At the monetary policy meeting this week, two policymakers voted for such as increase, arguing that there was no sign that the end of the Britain’s furlough program, which had supported wages during pandemic lockdowns, had eased constraints in the labor market — but they were outvoted by the seven other members. Three voted to halt the central bank’s bond-buying program immediately, instead of letting it run until its scheduled end next month.

This is a breaking news story. Check back for updates.

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