Bank of England holds interest rates at 4.75%

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The Bank of England has kept interest rates on hold at 4.75 per cent, after inflation edged up in November.

The Monetary Policy Committee’s decision, which was in line with forecasts from economists polled by Reuters, comes a day after the latest data showed that UK inflation rose to 2.6 per cent last month from 2.3 per cent in October.

The majority of rate-setters said the recent increase in wage and price growth had “added to the risk of inflation persistence”.

But three out of the nine MPC members — deputy governor Dave Ramsden, Alan Taylor and Swati Dhingra — voted for a quarter-point reduction because of sluggish demand and a weaker labour market.

BoE staff now expect zero growth in the final quarter of this year, weaker than forecast in November.

“Most indicators of UK near-term activity have declined,” the bank said on Friday.

It added that risks to global growth and inflation from geopolitical tensions and trade policy uncertainty had “increased materially” — an apparent reference to US President-elect Donald Trump’s plans to increase tariffs on imports to the US.

The pound dipped to $1.259 after the BoE’s decision, though it was still up 0.2 per cent on the day.

The yield on rate-sensitive two-year government bonds fell slightly to 4.46 per cent, flat on the day, with analysts citing the unexpectedly high number of dissents within the MPC.

The BoE cut rates by a quarter point at its previous meeting in November, but signalled at the time that another cut was unlikely until 2025. It has cut rates twice in 2024.

Traders also have been reining in expectations of cuts next year. Immediately before Thursday’s MPC meeting, investors were betting on two quarter-point cuts next year. In October they had expected four.

This is a developing story