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| Bank of England keeps interest rates at 5.25% but hints at a June cut | Bank of England keeps interest rates at 5.25% but hints at a June cut |
| (32 minutes later) | |
| Policymakers say they want to see more evidence that price pressures are easing before reducing rates | Policymakers say they want to see more evidence that price pressures are easing before reducing rates |
| The Bank of England has signalled it could start cutting interest rates as early as June after inflation was found to be “moving in the right direction”, as it kept borrowing costs on hold at 5.25% for the sixth time in a row. | The Bank of England has signalled it could start cutting interest rates as early as June after inflation was found to be “moving in the right direction”, as it kept borrowing costs on hold at 5.25% for the sixth time in a row. |
| Alongside the decision to keep rates on hold, the Bank said inflation was already on course to hit its target of 2% and would fall to just 1.6% in two years, opening the door to future cuts in interest rates. | |
| Giving a more upbeat assessment of the economic outlook than in its February report, the Bank also suggested the UK recession had ended, predicting the economy had grown 0.4% in the first three months of the year. The Office for National Statistics is to publish the official estimate of growth on Friday. | Giving a more upbeat assessment of the economic outlook than in its February report, the Bank also suggested the UK recession had ended, predicting the economy had grown 0.4% in the first three months of the year. The Office for National Statistics is to publish the official estimate of growth on Friday. |
| Members of the Bank’s nine-strong rate setting monetary policy committee (MPC) were split on the decision to hold interest rates, with two members – Swati Dhingra and Dave Ramsden – voting for an immediate cut to 5%. Dhingra was the lone voice calling for a rate cut at the previous meeting of the MPC. | Members of the Bank’s nine-strong rate setting monetary policy committee (MPC) were split on the decision to hold interest rates, with two members – Swati Dhingra and Dave Ramsden – voting for an immediate cut to 5%. Dhingra was the lone voice calling for a rate cut at the previous meeting of the MPC. |
| Andrew Bailey, the Bank’s governor, indicated that a rate cut at its next meeting in June was a possibility. “Before our next meeting in June, we will have two full sets of data – for inflation, activity and the labour market – that will help us in making that judgment afresh,” he said. “But, let me be clear, a change in bank rate in June is neither ruled out nor a fait accompli.” | Andrew Bailey, the Bank’s governor, indicated that a rate cut at its next meeting in June was a possibility. “Before our next meeting in June, we will have two full sets of data – for inflation, activity and the labour market – that will help us in making that judgment afresh,” he said. “But, let me be clear, a change in bank rate in June is neither ruled out nor a fait accompli.” |
| The Bank said a modest economic turnaround was unlikely to be inflationary, leaving the UK on course for several rate cuts this year. | The Bank said a modest economic turnaround was unlikely to be inflationary, leaving the UK on course for several rate cuts this year. |
| Before the Bank’s latest decision and commentary on Thursday, financial markets had been pricing in two rate cuts this year, with the first in August. | Before the Bank’s latest decision and commentary on Thursday, financial markets had been pricing in two rate cuts this year, with the first in August. |
| Bailey said: “With the progress we’ve made, to make sure inflation stays around the target, it is likely that we’ll need to cut bank rates in the coming quarters, possibly more so than is currently priced into markets.” | Bailey said: “With the progress we’ve made, to make sure inflation stays around the target, it is likely that we’ll need to cut bank rates in the coming quarters, possibly more so than is currently priced into markets.” |
| A modest increase in unemployment over the next year is expected to lead to easing wages growth across the private sector, reducing the pressure on prices. | A modest increase in unemployment over the next year is expected to lead to easing wages growth across the private sector, reducing the pressure on prices. |
| Bailey, said that at this point the MPC voted to wait and see after a majority agreed there needed to be more evidence of inflationary pressures remaining subdued. | Bailey, said that at this point the MPC voted to wait and see after a majority agreed there needed to be more evidence of inflationary pressures remaining subdued. |
| “We’ve had encouraging news on inflation and we think it will fall close to our 2% target in the next couple of months,” he said. “We need to see more evidence that inflation will stay low before we can cut interest rates. I’m optimistic that things are moving in the right direction.” | “We’ve had encouraging news on inflation and we think it will fall close to our 2% target in the next couple of months,” he said. “We need to see more evidence that inflation will stay low before we can cut interest rates. I’m optimistic that things are moving in the right direction.” |
| Inflation fell to 3.2% in March, according to official figures and is expected to have fallen to 2% in April after a reduction in the energy price cap, bringing down monthly household bills. | Inflation fell to 3.2% in March, according to official figures and is expected to have fallen to 2% in April after a reduction in the energy price cap, bringing down monthly household bills. |
| The Bank said inflation would be bumpy this year after a rise towards an average of 2.5% in the second half of 2024, before falling again in 2025 and 2026 to 1.6%. | The Bank said inflation would be bumpy this year after a rise towards an average of 2.5% in the second half of 2024, before falling again in 2025 and 2026 to 1.6%. |
| Increasing concerns that the conflict in the Middle East will widen and further disrupt shipping on major trade routes, raising prices, had so far been unfounded but remained a risk to the outlook, the Bank said in its latest report. | Increasing concerns that the conflict in the Middle East will widen and further disrupt shipping on major trade routes, raising prices, had so far been unfounded but remained a risk to the outlook, the Bank said in its latest report. |