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Bank of England resists pressure to raise interest rates

The Bank of England's Monetary Policy Committee (MPC) has resisted calls to increase interest rates from 0.1%.

The MPC voted by a majority of 7-2 to maintain interest rates at the all time-low seen since the pandemic began, the same split as last month.

With rising prices and concerns from the Bank of England that the consumer prices index measure of inflation could peak at 4-5% before cooling - far above its 2% target - the decision comes as a surprise to some analysts.

In October 2021, Bank of England Governor, Andrew Bailey, signalled the Bank was gearing up to raise interest rates, adding to the surprise.

He defended the MPC's decision to hold rates at their current levels, saying:

"We have to look at the causes of inflation. Many of the causes of inflation would not be tackled directly by raising interest rates.

"Supply chain issues would not be tackled and indeed it would have the worse effect: it would slow down the economy and it would probably cause unemployment to rise"

Julian Jessop, economics fellow at free market think tank, the Institute of Economic Affairs, described the Bank's decision as "defensible, but risky".

"By holding back today, the Bank could damage its credibility and end up having to raise rates more in future", he added.

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