The Bank of England on Thursday held interest rates steady at 5.25%, but hinted at cuts on the horizon as inflation falls faster than expected.
The Bank of England on Thursday held interest rates steady at 5.25%, but hinted at cuts on the horizon as inflation falls faster than expected.
The Monetary Policy Committee voted 8-1 to keep rates steady, with one member voting to cut by 25 basis points to 5%. Notably, no members voted for further hikes for the first time in this cycle, after two members favored a quarter-point increase at the previous meeting.
Headline inflation slid by more than expected to an annual 3.4% in February, hitting its lowest level since September 2021, data showed Wednesday.
The central bank expects the consumer price index to return to its 2% target in the second quarter, as the household energy price cap is once again lowered in April.
“Headline CPI inflation has continued to fall back relatively sharply in part owing to base effects and external effects from energy and goods prices,” the MPC said in its report.
“The restrictive stance of monetary policy is weighing on activity in the real economy, is leading to a looser labour market and is bearing down on inflationary pressures. Nonetheless, key indicators of inflation persistence remain elevated.”
The MPC maintained that monetary policy “will need to remain restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term.
