The Bank of England has opted to hold interest rates steady at 5.25% for the sixth consecutive meeting, as policymakers continue their battle against persistent inflation. The Monetary Policy Committee (MPC) voted 7-2 in favour of maintaining the current rate, with two members advocating for a cut.
Inflation Remains Key Concern
Governor Andrew Bailey acknowledged progress in bringing down inflation from its peak of 11.1% in October 2022 to the current 3.2%. However, he emphasised that the job isn't yet done, stating: "We need to see more evidence that inflation will stay low before we can consider cutting interest rates."
Economic Pressures Mount
The decision comes amid growing pressure on household budgets and business costs. While inflation has eased from historic highs, it remains above the Bank's 2% target, with services inflation proving particularly stubborn at 6%.
Key factors influencing the MPC's decision include:
- Stronger-than-expected wage growth
- Persistent services sector inflation
- Global economic uncertainty
- Mixed signals from the UK labour market
What This Means for Borrowers and Savers
The rate hold means:
- Mortgage holders won't see immediate relief
- Savers continue to benefit from higher returns
- Business loans remain expensive
- Consumer spending likely to stay constrained
Economists now predict the first rate cut may not come until August or September, later than previously anticipated. The Bank's cautious approach reflects concerns about reigniting inflationary pressures in an economy that showed 0.6% growth in the first quarter of 2024.
