LONDON (Reuters) – The Bank of England (BOE) on Thursday halted its long run of interest rate hikes due to Britain’s slowing economy, but said it did not consider the recent drop in interest rates. inflation as acquired.

The day after the announcement of a surprise weakening of inflation in Great Britain, the monetary policy committee of the Bank of England voted five to four to maintain the key rate at 5.25%.

Four members voted in favor of raising rates to 5.5%.

This is the first time since December 2021 that the BoE has not increased borrowing costs.

The central bank’s decision, contrary to market expectations, weighs on the pound sterling which loses 0.7% to 1.2258 dollars, its lowest in six months.

“There are growing signs that tightening monetary policy is having some impact on the labor market and on the dynamics of the real economy more generally,” the Monetary Policy Committee said in a statement. communicated.

The committee cut its gross domestic product (GDP) growth forecast for the third quarter to just 0.1%, from 0.4% in August, and noted clear signs of weakness in the real estate market.

Growth for the rest of the year is expected to be weaker than previous forecasts, the BoE warned.

Record wage growth, a major concern for the central bank, is not accompanied by other signs of labor market stress, the BoE said, suggesting the central bank expects it to slow Soon.

“Consumer price inflation is expected to continue to fall significantly in the short term, reflecting the year-on-year decline in energy prices, despite the recent rebound in oil prices,” the BoE said.

The institution, however, clarified that services inflation should remain high.

The Monetary Policy Committee reiterated its message that it was prepared to raise borrowing costs again if necessary.

“Further tightening of monetary policy would be necessary if inflationary pressures prove more persistent,” said the statement, which reaffirmed that monetary policy will be “sufficiently restrictive for long enough” to bring inflation back to its 2% target, this reaching 6.7% in August.

Governor Andrew Bailey and other members of the Monetary Policy Committee recently suggested that the BoE was close to pausing its series of interest rate hikes, but they also stressed that rates were likely to remain high.

In a separate statement on Thursday, Andrew Bailey welcomed the recent fall in inflation and the BoE’s forecast that it would continue to ease. “But there is no room for complacency,” he said.

“We will closely monitor developments to see if further increases are necessary.”

“We’ll need to keep interest rates high enough for long enough to make sure the job gets done. Whatever happens, we’ll do what it takes to get inflation back to normal,” insisted the BoE governor.

The monetary policy committee has also decided to accelerate the pace of its quantitative tightening.

As investors expected, the stock of Gilts will be reduced by 100 billion pounds over the next 12 months, compared to 80 billion over the last 12 months, both through sales and the non-reinvestment of mature securities , to reach 658 billion pounds, the BoE said.

(Report by William Schomberg, Andy Bruce and Suban Abdulla, Corentin Chappron, edited by Blandine Hénault)

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