Bank of England leaves key interest rate unchanged at 5.0%, Investing.com expects

Investing.com — The Bank of England left its benchmark interest rate unchanged at 5.0%, with officials saying they are willing to take a gradual approach to possible future policy easing following last month’s rate cut.

Economists had widely expected the decision, particularly after UK consumer prices last month came in at 2.2% on an annual basis, close to the bank’s medium-term target, but services inflation rose to 5.6% annually. Price increases in the services sector are seen as a key data point for the BoE.

The announcement comes a day after the Federal Reserve cut interest rates by 50 basis points on Wednesday and indicated it would announce further cuts this year, with Fed Chairman Jerome Powell saying there was “growing confidence” that the outlook for US inflation. The European Central Bank also cut borrowing costs for the second time since the COVID-19 pandemic last week.

However, the prospect of potentially sticky services inflation in the UK has led many forecasters to bet that the BoE will move more slowly than its peers to cut rates. Other indicators of price pressures were mixed. Wage growth, a major measure tracked by the BoE, cooled and the broader economy stagnated in July.

In August, the BoE cut interest rates from a 16-year high of 5.25%.