No Federal Reserve interest rate hike in US – with signs Bank of England could follow

The Federal Reserve – the US central bank – has opted not to increase its base interest rate but did not rule out further hikes as, it said, the full effect of rises has not been felt.

Ahead of the UK’s own knife-edge interest rate decision on Thursday, the Bank of England could potentially follow suit.

The cost of US borrowing had been brought to a 22-year high at the last interest rate meeting in July after a brief pause in the Fed’s programme of rate rises.

The US central bank had increased rates in an effort to make borrowing money more expensive in order to bring down inflation by taking money out of the economy and dampening spending.

Inflation in the United States stood at 3.7% in the year up to September, above the Fed’s 2% goal and a slight but continued increase from the two-year low of 3% recorded for June.

Despite the rate being significantly lower than the 6.7% of the UK, the Fed chair Jerome Powell said there’s is a “long way to go” in the process of bringing inflation down to the 2% target.

“It’s more likely than not that it will be appropriate for us to raise rates one more time in the two remaining meetings this year,” Mr Powell said, referencing the beliefs of the majority of rate deciders.

In the UK, the Bank of England could keep the base interest rate at 5.25% after 14 consecutive rises which began in December 2021.

Its latest decision is due at 12pm on Thursday.

A surprise drop in inflation has led analysts to believe the Bank may be in a position to ease its rate rises. A slight majority – 56% believe the Bank will pause its cycle of raises.

US interest rates stand at 5.25% to 5.5%. In the US, the interest rate is a range, rather than a single percentage – unlike the UK – because the Fed does not set a specific figure.

Instead, the figures are a target rate to guide lenders.