Bank of England holds interest rates at 3.75%

The Bank of England has voted  to hold interest rates at 3.75%.

The Bank’s Monetary Policy Committee has kept the rate unchanged since December, when it fell from 4%.

The decision to hold rates puts the UK out of step with both the US and the Eurozone.

Last night saw the US Federal Reserve raise interest rates for the first time in three years to a range of 3.75 and 4%.

Policy-makers say elevated inflation influenced the decision.

Last week the European Central Bank raised its key interest rates by a quarter percent, taking its deposit rate to 2.5%.

Interest rates influence how much people spend, and that affects how shops and businesses set their prices.

Higher interest rates often mean higher payments on mortgages and loans, meaning people have less to spend on other things.

Saving also becomes more attractive because the returns are higher.

Lower interest rates can have the reverse effect. If payments on mortgages and loans go down, there is more money to spend elsewhere.

But with UK inflation above the Bank’s 2% target, there is increasing pressure on policymakers to keep rates higher.

The Monetary Policy Committee makes a decision on interest rates eight times a year.

Today three members voted to increase rates to 4%, with six voting to keep them at 3.75%.

And what happens in the UK matters here too - with local banks broadly following UK interest rates.

So, for borrowers, today’s decision means no immediate relief from interest rates.

The Rate remains at 3.75%, with policy-makers still facing the difficult balancing act of trying to bring inflation down without putting too much pressure on households and businesses.