UK interest rates will stay high and could rise again, says Bank

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Interest rates are likely to stay high for longer and could rise again despite official forecasts that the UK economy has entered a period of stagnation.

The Bank of England warning came as it left rates unchanged for a second consecutive month at 5.25%, their highest level for 15 years.

The Bank also said it expects a sharp slowdown in the pace of price rises in the coming months.

Governor Andrew Bailey said it did not mean interest rates would fall soon.

"It's much too early to be thinking about rate cuts," said Mr Bailey.

Up until September, the Bank had raised rates 14 times in a row to tame soaring inflation which has been squeezing households.

It has led to increases in mortgage payments but also higher savings rates.

While inflation is easing, the Bank said interest rates are likely to "need to be restrictive for an extended period of time".

And Mr Bailey said: "We'll be watching closely to see if further rate increases are needed."

Inflation, which measures the pace at which prices are rising, eased to 6.7% in the year to September.

The Bank expects a sharp slowdown to 4.8% in October and says it will fall further next year, as energy and food price rises ease.

The drop means Prime Minister Rishi Sunak is likely to fulfil a pledge to halve inflation by the end of this year to around 5%.

However, the Bank has lowered its forecasts for the UK economy and expects zero growth from now, across the whole of next year - when there is likely to be a general election - and into 2025.

"UK economic growth is slowing," the Bank said in its inflation report.