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Bank of England pushes back against rate cut speculation

London, December 14, 2023, The Europe Today: The Bank of England stuck to its guns on Thursday and said British interest rates needed to stay high for “an extended period”, a day after the U.S. Federal Reserve signalled it would cut U.S. interest rates in 2024.

The Monetary Policy Committee voted 6-3 to keep rates at a 15-year high of 5.25% and Governor Andrew Bailey said there was “still some way to go” in the fight against inflation, challenging investors who have bet increasingly on rate cuts.

The three dissenting votes were in favour of raising borrowing costs and there was no talk of cutting them as the BoE remained concerned that inflation in Britain will prove stickier than in the United States and the euro zone.

The central bank also largely shrugged off data showing a slowdown in wage growth and a 0.3% fall in gross domestic product in October – which raises the prospect of a recession in the run-up to a national election expected for 2024.

Sterling jumped by more than half a cent against the U.S. dollar and British government bond prices pared some of the gains they had made in the wake of Wednesday’s Fed statement.

“Successive rate rises have helped bring inflation down from over 10% in January to 4.6% in October. But there is still some way to go. We’ll … take the decisions necessary to get inflation all the way back to 2%,” Bailey said in a statement.