Bank of England maintains rate at 5.25% to meet 2% inflation target

One member voted to cut the rate by 25 basis points to 5 per cent, while none voted for further hikes for the first time in this cycle, after two members favoured a quarter-point increase at the previous meeting.

“In recent weeks we’ve seen further encouraging signs that inflation is coming down,” Bank of England governor Andrew Bailey said in a statement.

“We’ve held rates again today at 5.25 per cent because we need to be sure that inflation will fall back to our 2-per cent target and stay there. We’re not yet at the point where we can cut interest rates, but things are moving in the right direction,” he noted.

Having declined through the second half of last year, UK gross domestic product (GDP) and market sector output are expected to start growing again during the first half of this year. Business surveys remain consistent with an improving outlook for activity, the central bank said in a release.

Headline inflation dropped by more than expected to an annual 3.4 per cent in February—its lowest level since September 2021.

The fiscal measures in Spring Budget 2024 are likely to raise the level of GDP by around 0.25 per cent over coming years. As the measures will probably also boost potential supply to some extent, the implications for the output gap, and hence inflationary pressures in the economy, are likely to be smaller, the central bank noted.

It expects the consumer price index to return to its 2-per cent target in the second quarter this year.

The UK economy slid into a technical recession in the fourth quarter last year and has witnessed two years of stagnation.

ALCHEMPro News Desk (DS)