Bank of England keeps main UK interest rate at 15-year high of 5.25% and cautions over oil prices

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The Bank of England kept its main interest rate unchanged at the 15-year high of 5.25% and indicated that borrowing costs will likely remain at these sort of elevated levels for a while yet especially if oil and gas prices increase sharply because of t...

LONDON — The Bank of England kept its main interest rate unchanged on Thursday at the 15-year high of 5.25% and indicated that borrowing costs will likely remain at these sort of elevated levels for a while, especially if oil and gas prices increase sharply because of the Israel-Hamas war.

In a statement, the bank’s nine-member Monetary Policy Committee indicated that inflation, as measured by the consumer price index, is set to fall quite dramatically in the next month, but will need time to get toward its 2% target rate over the coming year.

“We’ve held rates unchanged this month, but we’ll be watching closely to see if further rate increases are needed,” Bank of England Gov. Andrew Bailey said. «But even if they are not, it is much too early to be thinking about rate cuts.”

Minutes to the meeting showed that three of the nine members of the policy committee backed a quarter-point increase to 5.5% in order to push down harder on the inflation rate, which stood at 6.7% in the year to September.

In economic projections accompanying the decision, the bank said that inflation is set to fall to below 5% in October as domestic energy bills fall. However, it cautioned that oil and gas prices may start to rise again in light of the ongoing conflict between Israel and Hamas.

“It does create uncertainty. It does, I think, create a risk of higher energy prices,» Bailey said. “So far, I would say, that hasn’t happened, and that’s obviously encouraging, but the risk remains.”

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