The Bank of England voted by the narrowest of majoritie to maintain borrowing costs at 4%, the first pause since August 2024 and denying the Chancellor a pre-Budget boost.
Four of the nine members of the Monetary Policy Committee wanted to reduce Bank Rate by 0.25 percentage points, to 3.75%.
The vote tipped in favour of no change to the interest rate was influenced by stubborn Inflation, which at 3.8% is almost twice the Bank’s 2% target, though the committee judged it to have peaked.
It said progress in bringing down inflation is being made via an easing of pay growth and services price inflation, but also by subdued economic growth and slack in the labour market.
The five committee members who voted for no change were Governor Andrew Bailey, Megan Greene, Clare Lombardelli, Catherine L Mann and Huw Pill. The four members who called for a cut were Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor.
Mr Bailey said: “Rather than cutting Bank Rate now, I would prefer to wait and see if the durability in disinflation is confirmed in upcoming economic developments this year.”
Alpesh Paleja, deputy chief economist at the CBI said: “The hold is understandable: the Committee wants to wait out the Autumn peak in inflation and see if households’ inflation expectations ease from still-high levels. The Bank will also be waiting for clarity from the Autumn Budget, its impact on the growth and inflation outlook, and how pay settlements for next year are shaping up.
“Beyond today, though, the case for further cuts is strengthening. Economic momentum remains sluggish, as reflected in the CBI’s business surveys, and the MPC seem to be more reassured about the risks from greater inflation persistence. As a result, a couple more rate cuts in the coming months look likely.”
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