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The Bank of England kept rates steady at 5.25 per cent on Thursday as governor Andrew Bailey warned there was “still some way to go” before inflation hit its target.
The BoE’s Monetary Policy Committee said interest rates would need to be kept restrictive for an “extended period of time” and left open the option of further rate rises if necessary.
“There is still some way to go. We’ll continue to watch the data closely, and take the decisions necessary to get inflation all the way back to 2 per cent,” Bailey said.
The MPC voted six to three to keep the central bank’s key rate unchanged for a third meeting at its highest level in 15 years.
The BoE’s guidance contrasted sharply with that of the US Federal Reserve, which triggered a market rally overnight by opening the door to interest rate cuts in the new year.
The UK central bank repeated warnings that “further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures”.
The decision over whether to keep the BoE’s key rate unchanged or to lift it was again “finely balanced” the bank said.
“We’ve come a long way this year, and successive rate increases have helped bring inflation down from over 10 per cent in January to 4.6 per cent in October,” Bailey added.