Bank of England keeps main interest rate on hold at 4.75% after inflation spike

economictimes.indiatimes.com:

LONDON — The U.K.'s central bank has kept interest rates on hold as inflation moves further above its target rate, even though the British economy is flatlining at best.

The Bank of England's nine-member Monetary Policy Committee kept its main interest rate unchanged at 4.75% Thursday with new data showing inflation rising to 2.6%, further above the bank's 2% target.

In response the rate-setting panel, which last cut its key rate in November, is taking a cautious stance because lower borrowing costs could potentially stoke inflation even further.

That's a disappointment for many struggling sectors in the U.K. economy that would be helped by cheaper credit in an environment of paltry growth. The British economy has now contracted for two months in a row.

THIS IS A BREAKING NEWS UPDATE. AP's earlier story follows below.

LONDON (AP) — The U.K.'s central bank is set to keep interest rates on hold later Thursday as inflation has moved further above its target rate, even though the British economy is flatlining at best.

The Bank of England's nine-member Monetary Policy Committee is widely expected to keep the bank's main interest rate unchanged at 4.75% in the wake of figures showing inflation rising to 2.6%, further above the target of 2%.

With price pressures elevated in the crucial services sector, which accounts for around 80% of the U.K. economy, and wages strong, there are few indications that inflation will get back towards the target anytime soon. As a result, the rate-setting panel, which last cut its key rate in November, is set to take a cautious stance, as lower borrowing rates could stoke inflation.

That's a disappointment for many struggling sectors in the U.K. economy that would be helped by lower interest