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.
