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Bank of England keeps rates at 5.25% ahead of UK election - REUTERS

JUNE 20, 2024

By David Milliken and Suban Abdulla LONDON, June 20 (Reuters) - The Bank of England kept its main interest rate unchanged at a 16-year high of 5.25% on Thursday ahead of a July 4 election, but some policymakers said their decision not to cut rates was now "finely balanced".

The BoE's Monetary Policy Committee voted 7-2 to keep rates on hold, in line with economists' expectations in a Reuters poll. Deputy Governor Dave Ramsden and external MPC member Swati Dhingra remained the only policymakers to support a cut to 5%. BoE Governor Andrew Bailey said in a statement alongside the decision that it was "good news" that the latest inflation data had shown inflation was back at its 2% target, but that it was too soon to cut rates.

"We need to be sure that inflation will stay low and that's why we've decided to hold rates at 5.25% for now," he said. Bailey's statement differed from last month, when he said he was "optimistic" that data was moving in the right direction for a rate cut.

The BoE vote follows a long-trailed decision by the European Central Bank earlier this month to start to cut rates, while financial markets do not expect the U.S. Federal Reserve to cut until late this year. Markets on Thursday viewed a BoE rate cut as unlikely before September or November, although a Reuters poll of economists published last week showed most expected a rate cut on Aug. 1 after the BoE's next rate decision.

Any cut is likely to be too late for Prime Minister Rishi Sunak, whose Conservative Party is around 20 points behind the opposition Labour Party in the pre-election polls. While Sunak has sought credit for the fall in inflation since he took office in October 2022, when it was at a 41-year high of 11.1%, Labour blames high mortgage rates on economic mismanagement by the Conservatives' previous leader, Liz Truss. The BoE said the upcoming election had no impact on its decision. 

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