UK Interest Rates Held Steady at 0.5%

Despite inflation climbing to 4.5 percent in April from 4 percent the month before, the Bank of England’s Monetary Policy Committee has voted to leave the benchmark interest rate unchanged at 0.5 percent. This is the 27th straight month that rates have been held steady,

While inflation remains a concern and is expected to climb to 5 percent by the end of the quarter, the increase is primarily due to rising utility, gasoline, and food prices. This reality poses a dilemma for policy makers – increase interest rates to combat inflation but this will likely hurt the overall economy through higher borrowing costs, or leave interest rates low and risk further price escalations.

Most economists feel it is still too early to raise interest rates but if inflation does continue to surge, the Bank of England will have little choice but to hike rates to slow the ascent of prices.

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