Andrew Bailey paves the way for a summer interest rate cut

The Bank of England’s Monetary Policy Committee has voted to hold interest rates for the sixth time in a row. Members of the MPC voted 7 – 2 to maintain the base rate at 5.25 per cent – with two members voting to cut rates by 0.25 percentage points. This decision will come as no surprise to the markets, which had already factored in a rate hold. The Bank made clear in March that key indicators – including the state of the UK labour market and the risk of inflation rising again – would influence its decision, none of which dramatically changed in the last seven weeks.

The Committee repeats from previous reports that monetary policy must ‘remain restrictive for sufficiently long to return inflation to the 2 per cent target sustainably in the medium term’. Despite the Bank expecting inflation to have fallen back close to target in April (we’ll find on 22nd May), concern remains over persistent inflation in the future.