The most recent consumer price index for the U.K. rose 4% year-over-year in December, up from 3.9% in November, and the first time the CPI rate has increased since February 2023.
"Votes both for tightening and easing reveal an increasing divergence in the views on the committee," said Mitul Patel, senior LDI portfolio manager at State Street Global Advisors. "We continue to expect interest rate cuts later in the year, but there is unlikely to be an imminent change in bank rate."
The BOE said in a news release that its reasoning for holding rates steady included that global GDP growth remained subdued, although activity continues to be stronger in the U.S. The statement also noted that inflationary pressures are abating across the eurozone and U.S., wholesale energy prices have fallen significantly, and material risks remain from developments in the Middle East and from disruption to shipping through the Red Sea.
Lily Megson, policy director at advisory firm My Pension Expert, said: "Maintaining base rates is not an unexpected decision — perhaps inevitable given the sticky inflation of previous months. However, it offers no clear answers for those who have felt trapped in financial limbo for the past year. More can and should be done to ensure those who are still struggling to plan for the future have access to adequate support."
This week, the U.S. Federal Reserve also maintained interest rates, at a range of 5.25% to 5.5%, a continued 23-year high for the nation. Jerome Powell, chair of the Federal Reserve, expressed a desire to see more data in underlying inflation numbers before making cutting rates. In the U.S. in December, the CPI rose 3.2% from a year earlier.
Eurozone inflation also eased less than anticipated at the start of the year, challenging investor expectations that the European Central Bank will begin lowering interest rates as soon as the spring, according to Bloomberg.
