Interest rates kept at 0.75 per cent but Bank of England signals future rises

THE BANK of England has kept interest rates on hold at 0.75 per cent after August’s hike, but it confirmed further increases are likely to be needed to rein in inflation.

Members of the Bank’s ninestrong Monetary Policy Committee (MPC) voted unanimously to keep rates unchanged, having backed a quarter-point rise last month – only the second since the financial crisis.

The Bank said economic growth was on course to beat expectations for the third quarter thanks to a bumper July.

But it cautioned over “greater uncertainty” on Brexit as fears of a no deal scenario rise.

In minutes of the latest rates meeting, the Bank revealed its internal estimates show economic growth is set to pick up pace to around 0.5 per cent in the third quarter, from 0.4 per cent between April and June.

Official figures on Monday showed the UK economy enjoyed a growth spurt in July, with expansion of 0.3 per cent in the month and 0.6 per cent on a three-month basis thanks to a surge in spending driven by the World Cup and heatwave.

The Bank said while the outlook for consumer spending had not changed substantially, “if anything, spending in the third quarter might prove to be slightly stronger than expected”.

Its decision to hold rates came as it said the August set of forecasts appear broadly on track.

But it said: “Were the economy to develop broadly in line with the August inflation report projections, an ongoing tightening of monetary policy would be appropriate to return inflation sustainably to the two per cent target at a conventional horizon.”

Sterling was largely unmoved against the US dollar following the rates decision, trading up 0.1 per cent on the day to 1.30.

The Bank signalled last month that rates would need to rise by around a quarter point a year over the next two or three years to bring inflation – currently running at 2.5 per cent – back to target.