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Bank of England leaves interest rates unchanged

A member of the public walks through heavy rain near the Bank of England in May 2023.

Dan Kitwood | Getty Images News | Getty Images

LONDON — The Bank of England on Thursday left interest rates unchanged, but said monetary policy will likely need to stay tight for an “extended period of time.”

The Monetary Policy Committee voted 6-3 in favor of keeping the main Bank rate at 5.25%, with three members preferring another 25-basis point hike to 5.5%.

“The MPC’s latest projections indicate that monetary policy is likely to need to be restrictive for an extended period of time. Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures,” the MPC said in its Thursday statement.

Earlier this morning, markets were pricing around an 89% chance of a second consecutive hold, according to LSEG data, after the Bank ended a run of 14 straight hikes in September .

Since its last projections in October, inflation has weakened but remains well above the central bank’s 2% target. Meanwhile, economic activity has softened considerably and the labor market has shown signs of loosening.

The U.S. Federal Reserve on Wednesday also kept rates unchanged and upgraded its economic growth assessment, with chairman Jerome Powell insisting that the Federal Open Market Committee is not discussing rate cuts at this point. However, markets interpreted his comments at the subsequent press conference as dovish, prompting a sizeable fall in short-term U.S. Treasury yields that spilled over into Europe and the U.K.

Two-year U.K. gilt yields slid to their lowest point since June ahead of the Bank of England’s decision on Thursday. Yields move inversely to prices.

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