The Bank of England has left interest rates unchanged at 5.25%.
The Bank’s rate setting Monetary Policy Committee (MPC), chaired by Governor Andrew Bailey, voted 6-3 to keep the cost of borrowing at its highest level since 2008.
The MPC said it "continues to judge that monetary policy is likely to need to be restrictive for an extended period of time." Three MPC members voted for a further rise to 5.5%.
A Treasury Spokesperson said: “We have turned a corner in our fight against inflation and real wages are rising, but we must keep driving inflation out of the economy to reach our 2% target."
The minutes of the committee meeting show that the Bank expects "GDP growth to be broadly flat in Q4 and over coming quarters." It was the third MPC meeting on the trot when rates were kept on hold and comes days short of the second anniversary of the first rise from the pandemic era emergency low of 0.1% to 0.25%.
That was followed by 13 more rises up a final quarter point hike in August before the current pause began
But with inflation falling rapidly - the Consumer Prices Index dropped to 4.6% in October - it is now widely expected that the next movement will be down. City markets anticipate the first cut to be by May.
In the meantime homeowners and businesses will have to continue to cope with the elevated borrowing costs that have sent mortgage arrears and company insolvency rates soaring this year.
Paula Higgins, chief executive of the campaign group HomeOwners Alliance, says . “After two years of interest rate rises and with inflation coming down, we think it’s unfair that homeowners are held ransom by the Bank of England in this way. The burden is too heavily borne by mortgage borrowers and we’re only at the tip of the iceberg of financial worries.
“If the Bank of England can’t start lowering rates now, then perhaps they can give us a more detailed forecast, because homeowners can’t afford to put huge financial decisions on hold while the Bank of England’s ‘wait and see’ stance every 6 weeks throughout 2024.”
Jatin Ondhia, CEO of investment platform Shojin, said: “The Bank of England is walking a tightrope. Understandably, it is unwilling to loosen its grip on inflation by dropping rates any time soon. But it also has to be careful not to inflict excessive damage on the UK’s contracting economy.
"It’s an unenvious task, but we should welcome the fact that the base rate is likely to hold at 5.25% in the short-to-medium-term – it means people can finally make financial plans with a degree of certainty, and the timing couldn’t be better."
Alex Lyle, director of Richmond estate agency Antony Roberts, said: "Another rate hold will be viewed as another step in the right direction, fuelling hopes that longer-term stability on rates is on the way and that they might even start to come down in the not-so-distant future. This should increase confidence in those who have been anxious about committing to a property purchase, so is encouraging for the market as we move into a new year."
