Bank of England holds interest rate steady at 5%

The Bank of England held interest rates steady at 5% Thursday, adding that the cost of borrowing would be cut in the future, “gradually over time.” Traders are now betting that the UK’s central bank will make its next cut in November.

Prices in the UK have continued to rise higher than the Bank’s goal of 2%, and the bank’s governor, Andrew Bailey, said officials were moving cautiously so as to “not cut too fast or by too much.”

The decision comes after the US Federal Reserve announced a half a percentage point cut Wednesday. Following the UK bank’s announcement Thursday, the pound spiked to 1.33 against the US dollar — its highest since March 2022 — a rally “propelled by the widening interest rate divergence between the BoE and the Federal Reserve,” Euronews noted.

Bank officials in the UK also said it expects the economy to grow just 0.3% in the third quarter, a slowing that presents a challenge for the new Labour government as it tries to enact on some of its policy promises — including a costly overhaul of the National Health Service.