Bank of England leaves policy rate unchanged

In the statement of the BoE Monetary Policy Board, it was stated that 6 of the board members, including BoE Governor Andrew Bailey, voted to keep the policy rate at 3.75 percent, and 3 of them voted to increase it by 25 basis points to 4 percent.

In the statement, it was stated that it was decided that it was appropriate to keep the policy rate constant at 3.75 percent, and that the bank was ready to take the necessary steps to ensure that inflation returned to the 2 percent target in the medium term.

In the statement, it was reported that the prolonged conflicts in the Middle East have led to new increases in the prices of crude oil and processed energy products, and that energy prices are above pre-conflict levels and are fluctuating.

It was reminded in the statement that annual inflation in the UK increased to 3.1 percent in August, and that inflation is expected to increase further in the coming quarters due to the effect of high energy prices.

In the statement, it was emphasized that the monetary policy to be implemented to permanently reduce inflation to the 2 percent target will depend on the magnitude and duration of the energy shock and how the shock spreads throughout the economy.

It was stated in the statement that economic activities were slightly stronger than expected, and that weak labor market conditions and high borrowing costs faced by households and companies would limit inflation over time.

In the statement, it was stated that the risks regarding the inflation outlook are upward and higher than the assessment in July.

The BoE predicted that inflation would rise to approximately 3.75 percent in the last quarter of this year and slightly above 4 percent in the first quarter of 2027.

In his statement after the decision, BoE Governor Bailey said, "Today, we kept the interest rate constant at 3.75 percent." he said.

Noting that the increase in global energy costs has a limited impact on price and wage determination in the UK, Bailey said, "However, the longer this fluctuation lasts, the greater its impact on inflation will be and the more likely it will be for us to raise the interest rate to ensure inflation returns to our 2 percent target." made his assessment.

Yesterday, the US Federal Reserve (Fed) increased interest rates for the first time since 2023, increasing the policy rate by 25 basis points to the range of 3.75-4 percent.

Last week, the European Central Bank (ECB) increased its three main policy rates by 25 basis points each in response to the energy crisis triggered by the tension in the Middle East and the renewed price pressures.