Bank of England leaves interest rates on hold, warns of declining UK economic activity

By Aysu Bicer

LONDON (AA) - The Bank of England on Thursday left UK interest rates on hold.

The Bank's Monetary Policy Committee voted by a majority of 6-3 to maintain the bank rate at 4.75%

But three policymakers wanted to cut rates to 4.5%.

"Since the MPC’s previous meeting, twelve-month CPI inflation has increased to 2.6% in November from 1.7% in September. This was slightly higher than previous expectations, owing in large part to stronger inflation in core goods and food," the bank said.

"Services consumer price inflation has remained elevated. Headline CPI inflation is expected to continue to rise slightly in the near term. Although household inflation expectations have largely normalized, some indicators have increased recently," it added.

The Bank also raised concerns about a weakening UK economy, as several indicators of near-term activity have declined in recent weeks.

It highlighted that GDP growth in the final months of the year is expected to be softer than previously projected in the November Monetary Policy Report. Bank staff have adjusted their forecasts downward, reflecting mounting economic challenges.

On the labor front, the MPC said the market is now "broadly in balance." However, there remains significant uncertainty regarding its trajectory.

While private-sector regular average weekly earnings saw a notable increase in the three months to October, this growth was more volatile compared to other wage indicators, it said.

Looking ahead to 2025, the Bank of England’s latest agents’ intelligence suggests that average pay settlements will likely fall within the 3% to 4% range.