The Bank of England held interest rates unchanged at 3.75%, in line with expectations, as the central bank seeks to balance above-target inflation and subdued economic activity.
The move was backed by seven of the nine members of the committee. CNBC noted that the U.K.'s inflation rate clocked in at 2.8%, lower than expected. However, the trend is not expected to hold as a price cap on energy prices is set to rise by 13% in the summer, with energy expected to rise to a 2-year-high.
The world's major central banks are implementing different strategies to deal with persistent inflation. On Wednesday, the Federal Reserve kept interest rates unchanged in Kevin Warsh's first meeting as chair.
Concretely, the Federal Open Market Committee (FOMC) maintained the federal funds rate in the 3.5%-3.75% range, in line with economists' expectations for the meeting.
The vote was unanimous, in contrast with previous meetings. "Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East," the central bank said in its statement. It added that "job gains have kept pace with the workforce."
Policymakers also released their expectations for the future. Concretely, they believe that, under current circumstances, they will implement one rate hike this year and cut it once in 2027.
Elsewhere, the European Central Bank (ECB) hiked interest rates for the first time since 2023, citing the pressures from the war in Iran. The key rate now stands at 2.25%.
Markets widely expected the body to make such a move, claiming that the decision is "robust across a range of scenarios mapping out how the shock might evolve and affect the medium-term outlook for the euro area."
The ECB also raised its inflation forecast. It now expects it to average 3% this year before dropping to 2.3% in 2027 and 2% the year after. The outlook has changed as a result of an expectation of higher energy prices.
At the same time, the body reduced its economic growth forecast, now expecting a 0.8% expansion for the year, 1.2% for 2027 and 1.5% for 2028.
And earlier this week, Japan's central bank raised interest rates to their highest level in more than three decades, tightening monetary policy as the country grapples with inflationary pressures and a weakening yen.
The Bank of Japan increased its benchmark short-term policy rate by 25 basis points to 1%, marking the first rate hike since December and bringing borrowing costs to their highest level since 1995. The decision was approved by a 7-1 vote at the conclusion of the bank's two-day policy meeting, according to Reuters.
