The Bank of England voted to maintain interest rates at 5.25 per cent today (November 2).
The central bank’s monetary policy committee voted six to three to hold the rate.
The three members who didn't vote for the hold wanted to increase the bank rates by 0.25 percentage points, to 5.5 per cent.
The rate has risen to 5.25 per cent from 0.1 per cent in December 2021, though it has fallen from an all time high of 11 per cent in 2022.
In its report, the bank said keeping interest rates high is the "best way to make sure inflation comes down and stays down".
The bank said: "Higher interest rates make it more expensive for people to borrow money and encourages them to save. That means that, overall, they will tend to spend less. If people on the whole spend less on goods and services, prices will tend to rise more slowly. That lowers the rate of inflation."
William Marshall, chief investment officer at Hymans Robertson said: “Although it is looking increasingly likely that we have reached the peak in interest rates, the BoE has been keen to reiterate that they expect rates to be held at this level for a sustained period of time – markets are not pricing in a rate cut until next Autumn.
“Investors might think that the level of interest rates on offer makes it an opportune time to save in cash rather than investing. It is correct that cash is more attractive than it has been for a number of years, but the same can be said for bonds and other assets that should still deliver better returns in the long-term.”
Dean Butler, managing director for retail direct at Standard Life said the decision would come as a "welcome relief to people facing another difficult winter".
He added: "There’s also some good news for people in a position to save. It looks like rates might be peaking, however there’s no sign they’ll start to fall anytime soon and best buy fixed cash savings accounts are currently sitting between 5.5 and 6 per cent."
Lindsay James, investment strategist at Quilter Investors, said: "While on the surface, this may look good news, it doesn’t mean that financial conditions are easing anytime soon. Data shows that the effective interest rate on outstanding mortgages is at 3.1 per cent, whilst the average quoted rate for new or refinanced mortgages now sits at around 5.5 per cent.
"With around 30 per cent of mortgages due to be refinanced over the next two years, homeowners are still likely to face a painful upward adjustment of their payments, acting as an ongoing headwind for the UK economy."
tara.o'connor@ft.com
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