In an unexpected move on Thursday, the Bank of England (BoE) decided to leave its main interest rate unchanged at a 15-year high of 5.25%. This decision marks the first time in nearly two years that the bank has paused its cycle of interest rate increases, which had been implemented to curb inflation.
The surprising decision came after an unexpected slowdown in UK price rises in August, with inflation falling to 6.7%, its lowest level since Russia invaded Ukraine in February 2022. The decline in inflation was a key factor influencing the BoE’s decision, which followed a similar move by the U.S. Federal Reserve a day earlier.
This pause in interest rate hikes comes as a relief to millions of homeowners who have been facing higher mortgage rates due to the previous 14 consecutive rate increases by the BoE. These increases were part of a global effort by central banks to manage an inflation surge initially sparked by supply chain issues related to the COVID-19 pandemic and later exacerbated by Russia’s invasion of Ukraine, which led to soaring energy and food costs.
In response to the BoE’s decision, Dominique Moerenhout, CEO of EPRA, called for more clarity on potential policy directions. “Signalling from the bank and economic leaders in advance of today led to much anticipation of a rate rise. The consensus from those we’ve been speaking to across Europe’s listed real estate industry is that investors, developers and their suppliers desperately need clearer indications from central banks on likely policy direction,” Moerenhout said.
The BoE’s decision contrasts with the European Central Bank’s (ECB) move a week ago to hike interest rates again, raising the overall deposit rate to 4%. In a statement, the ECB expressed its determination to ensure that inflation returns to its 2% medium-term target in a timely manner, thus deciding to raise the three key ECB interest rates by 25 basis points.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
Source: Investing.com
