Bank of England holds benchmark rate at 5.25%

LONDON -- The Bank of England (BoE) held its benchmark interest rate at a nearly 16-year high of 5.25 percent on Thursday.

At its meeting ending on Wednesday, the BoE's Monetary Policy Committee (MPC) voted by a majority of 6-3 to hold the rate. Two members preferred to increase it by 0.25 percentage point to 5.5 percent, while one member preferred to reduce it to 5 percent.

Following recent weakness, the United Kingdom's (UK) economic growth is expected to pick up gradually during the forecast period, in large part reflecting a waning drag on the rate of growth from past rate increases, the BoE said in a statement.

Inflation is projected by the central bank to fall temporarily to the 2 percent target in the second quarter of 2024 before increasing again in the second half of this year.

Monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2 percent target sustainably in the medium term in line with the central bank's remit, the BoE noted.

It will keep under review for how long the benchmark rate should be maintained at its current level, the central bank added.

"The vote split at this month's meeting suggests the MPC won't be rushing to reduce Bank Rate soon, but its new language leaves open the prospect of multiple 25bp reductions before the end of this year," Samuel Tombs, chief UK economist at Pantheon Macroeconomics consultancy, said.