Bank of England joins US Fed in avoiding another interest rate hike after inflation declines

The Bank of England has paused nearly two years of interest rate increases after a surprising fall in UK inflation eased concerns about the pace of price rises.

In a development Thursday that few predicted just two days ago, the central bank kept its main interest rate unchanged at a 15-year high of 5.25 per cent. The US Federal Reserve also held rates steady a day earlier.

It comes to the relief of millions of homeowners who are facing higher mortgage rates.

News Wednesday that inflation unexpectedly fell to 6.7 per cent in August, its lowest level since Russia invaded Ukraine in February 2022, clearly influenced the bank's decision.

Higher interest rates, which cool the economy by making it more expensive to borrow, have contributed to bringing down inflation worldwide.

The bank, like others around the world, has been aggressively raising interest rates to get on top of an inflation surge first stoked by supply chain issues related to the COVID-19 pandemic and then Russia's invasion of Ukraine, which sent energy and food costs soaring.