Bank of England holds rates at 3.75% in 6-3 split vote as inflation hits five-month high

The Bank of England decided to keep interest rates at 3.75%, following a 6-3 split vote, despite inflation hitting a five-month high. The decision was made by the Monetary Policy Committee, with only three members advocating for a quarter-point increase to 4%. This stance puts the Bank of England at odds with both the Federal Reserve and the European Central Bank, which have both increased rates within the past week.

The Committee anticipates inflation to continue rising in the coming quarters, citing the persistent volatility and higher levels of crude and refined energy prices. The central bank's decision to maintain rates rests on the absence of significant second-round effects of expensive energy on broader wages and prices. However, they warn that the risk of such effects increases as energy prices remain volatile and high.

Brent crude and UK wholesale gas prices have surged by 36% and 78% respectively since July, with Brent at $106 a barrel and gas at 207 pence per therm on September 14. The Committee believes that the economic situation is holding up slightly better than expected, and that a soft labor market and higher borrowing costs will help curb inflation over time.

This decision contrasts with the Federal Reserve's unanimous decision to raise its benchmark rate, and the European Central Bank's recent increase. The Bank of Japan is expected to follow suit on Friday, leaving the Bank of England as the only major central bank to maintain steady rates this week.