Bank of England Leaves Interest Rate Intact As Inflation Spike Eases

LONDON (NEWSnet/AP) — The Bank of England has paused nearly two years of interest rate increases after a surprising fall in U.K. inflation eased concerns about prices.

In a development Thursday that few predicted, the central bank kept its main interest rate unchanged at a 15-year high of 5.25%.

This decision is seen as a relief to millions of homeowners who are facing higher mortgage rates. Unlike in the U.S., most homeowners in Britain have mortgage rates locked for only a few years at a time, so those whose deals expire soon will see higher borrowing costs given the rise in interest rates during the past couple of years.

News Wednesday that U.K. inflation unexpectedly fell to 6.7% in August, its lowest level since Russia invaded Ukraine in February 2022, clearly influenced the bank’s decision.

Higher interest rates, which cool the economy by making it more expensive to borrow, have contributed to bringing down inflation worldwide.

The bank, like others around the world, has been aggressively raising interest rates to get on top of an inflation surge first fed by supply chain issues related to the COVID-19 pandemic and then Russia’s invasion of Ukraine, which sent energy and food costs soaring.

The U.S. Federal Reserve also held rates steady this week.

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