The Bank of England has decided to maintain interest rates at 4.75%, despite internal disagreements among the rate-setting committee. Three members of the nine-member committee proposed a reduction to 4.5% to stimulate growth, but the majority voted to keep the rate unchanged.

The Bank’s assessment revealed that the economy performed worse than anticipated, with no growth recorded between October and December. Although inflation and wage growth exceeded expectations, the overall economic performance has been disappointing. The Bank now predicts zero growth for the final quarter of 2023, revising its previous forecast of 0.3% growth.

Bank Governor Andrew Bailey stated that a gradual approach to interest rate cuts remains the right course of action, though uncertainty surrounding the economy makes it difficult to commit to specifics on the timing or magnitude of future reductions. The first-rate cut is now expected by February 2024.

Chancellor Rachel Reeves supported the Bank’s approach, emphasizing the importance of maintaining inflation control to put more money in the pockets of working people. However, opposition parties, such as the Liberal Democrats, criticized the government’s economic policies, urging action to address the ongoing challenges, particularly in the healthcare and care sectors.

Economists, including Ruth Gregory from Capital Economics, suggested that the Bank might cut rates sooner than anticipated, reflecting the growing challenges facing the U.K. economy.