It is “too early” to speculate about when UK interest rates will be cut, according to the governor of the Bank of England.
Andrew Bailey spoke after the Bank voted to hold interest rates for a third time at 5.25% – a 15-year high.
On Wednesday, the US Federal Reserve signalled that rates were at or close to a peak and could fall next year.
But in contrast, Mr Bailey said it was not possible to “definitively” say the same for the UK.
The Bank has lifted interest rates 14 times since December 2021 to cool soaring inflation, which measures the pace at which prices are rising.
In the UK, this has been fuelled by higher energy and food costs following Russia’s invasion of Ukraine.
While price rises have eased to 4.6%, that is still more than double the Bank of England’s 2% inflation target.
“We have seen an unwinding of many of the shocks, the big shocks, that we had last year, particularly related to the war in Ukraine and so on,” Mr Bailey said.
“But there is this persistent element to [inflation] which we have got to take out.”
While he was encouraged by the progress made in slowing down inflation, the governor said: “My view at the moment is it’s really too early to start speculating about cutting interest rates.
“I don’t think that we can say definitively that interest rates have peaked,” he said, but added: “I hope that we are at the top of the cycle.”
In the minutes from the Bank’s rate-setting committee meeting, it said interest rates would need to remain higher “for sufficiently long” to return inflation to 2%.
One factor discussed by the Monetary Policy Committee (MPC) was that UK inflation remains worse than in the US and the eurozone.
While the main inflation rate has fallen everywhere, “core inflation [which strips out the most volatile goods] has fallen back by less in the UK” and “measures of wage inflation were also considerably higher in the UK than elsewhere”.
Six out of the nine members of the MPC voted to hold rates at 5.25%, and there was no change to the language in the minutes that rates would remain at these levels for an “extended period”.
It also signalled that interest rates could even rise “if there were evidence of more persistent inflationary pressures”. Indeed, the other three committee members voted for a rise to 5.5% this month.