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The Bank of England has kept interest rates on hold at 5.25 per cent, denting Conservative hopes of a boost to personal finances just two weeks before the UK’s July 4 election.
But the BoE signalled a reduction was possible as soon as its next meeting in August.
Thursday’s seven to two decision by the Monetary Policy Committee, which was in line with economists’ expectations, leaves rates at a 16-year high.
It came despite data the day before showing that headline inflation has fallen to the BoE’s target of 2 per cent for the first time in three years. However, service inflation was higher than expected at 5.7 per cent.
“It’s good news that inflation has returned to our 2 per cent target,” said Andrew Bailey, the BoE’s governor. “We need to be sure that inflation will stay low and that’s why we’ve decided to hold rates at 5.25 per cent for now.”
Deputy BoE governor Sir Dave Ramsden and external MPC member Swati Dhingra repeated previous votes for an immediate cut.
Sterling weakened 0.3 per cent against the dollar to $1.2679 after the decision.
Traders are now pricing in a roughly 40 per cent chance of a first quarter-point cut at the BoE’s August meeting, up from roughly a third before Thursday’s announcement.
This is a developing story
