Bank of England Holds Base Rate at 4%... Decides to Slow Pace of Quantitative Tightening

The Bank of England (BOE), the central bank of the United Kingdom, held a Monetary Policy Committee (MPC) meeting on the 18th (local time) and decided to keep the base interest rate unchanged at 4.00% per annum.

Exterior view of the Bank of England in London, England. Photo by Yonhap News

Out of the nine members of the Monetary Policy Committee, seven supported maintaining the current rate. Two members expressed opinions in favor of a 0.25 percentage point cut to 3.75%.

The Bank of England had lowered the base interest rate five times from August of last year until last month. The current base rate of 4.00% is the lowest since February 2023. The Monetary Policy Committee noted that mid-term inflationary pressures remain significant. In August, the UK's Consumer Price Index (CPI) rose by 3.8% year-on-year, the same rate as in July, exceeding the BOE's target of 2%.

Andrew Bailey, Governor of the Bank of England, stated, "We expect the inflation rate to return to our target of 2%, but we are not out of the woods yet, so any future rate cuts should be gradual and cautious."

The Monetary Policy Committee also decided to slow the pace of quantitative tightening (QT), with the decision made by a 7-to-2 vote, the same as for the base rate. Until now, the Bank of England has been reducing its assets by 100 billion pounds (189 trillion won) per year, but starting next month, this will be reduced to 70 billion pounds (132 trillion won) per year.