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The Bank of England has held interest rates at 5.25 per cent, despite growing evidence that inflation is under control, but signalled it could cut rates this summer.
The bank’s monetary policy committee on Thursday voted to keep the benchmark rate steady, in line with economists’ expectations. The rate has been 5.25 per cent since August last year.
Seven members of the committee voted to hold rates steady. Deputy governor Dave Ramsden joined external member Swati Dhingra, who backed a cut in March, in voting for an immediate reduction to borrowing costs.
Economists polled by Reuters had forecast only one vote for a cut.
Andrew Bailey, the bank’s governor, voted with the majority to keep policy unchanged as he opened the door to a downward move as soon as the June MPC meeting.
He said that there had been “encouraging news” on inflation and that it would fall close to the 2 per cent target in the next couple of months, but that the BoE was not yet ready to act.
Sterling slid 0.3 per cent against the dollar to $1.2462 as the bank signalled it was closer to easing policy.
Interest rate sensitive two-year gilt yields nudged down 0.02 percentage points to 4.29 per cent. The FTSE 100 index of blue-chip stocks nudged up 0.4 per cent on rising hopes of rate cuts this summer.
UK inflation eased in March, falling from 3.4 per cent to 3.2 per cent, but it remains above the 2 per cent target.
This is a developing story