Central bank holds interest rates steady amid inflation concerns

The central bank voted unanimously to hold its benchmark interest rate at 4.75%, defying market expectations of a quarter-point cut. In a statement, the monetary policy committee cited persistent inflationary pressures in the services sector and a tight labour market as key factors behind the decision.

Consumer price inflation remains at 3.2%, above the bank's 2% target, though it has fallen significantly from its peak of 7.8% two years ago. The committee noted that while the disinflationary trend is encouraging, it wants to see further evidence of sustained progress before easing monetary policy.

Market Reaction

Bond yields rose slightly following the announcement, while the currency strengthened 0.3% against the dollar. Equity markets were mixed, with bank stocks gaining on the prospect of higher-for-longer rates while rate-sensitive sectors like real estate and utilities declined.