Interest rates live: Bank of England announces bombshell decision

 The Bank of England has kept interest rates unchanged at 3.75%, marking its first freeze of the year. The Bank's nine-member Monetary Policy Committee (MPC) agreed to hold in a 5-4 vote split. Four members voted to reduce the Base Rate by 0.25 percentage points to 3.5%.

Andrew Bailey, the governor of the Bank of England, said: "We now think that inflation will fall back to around 2% by the spring. That's good news. We need to make sure that inflation stays there, so we've held interest rates unchanged at 3.75% today.

"All going well, there should be scope for some further reduction in the bank rate this year."

The base rate significantly impacts the cost of mortgages and loans, and influences the interest rates banks offer on savings accounts. It peaked at 5.25% in late 2023, but policymakers have since reduced it in the months following, as inflation has dropped to more manageable levels. It's currently rising at a pace of 3.4% - far lower than the 11% highs seen during 2022's energy crisis, but still higher than the Bank's 2% target. The Bank of England typically raises interest rates when inflation is high to curb spending and slow price increases.

The CPI rate increased to 3.4% in December, up from 3.2% in November, the Office for National Statistics (ONS) said. This was largely driven by festive travel demand and by higher tobacco duties, which pushed prices up at the end of the year.