The Bank of England is edging closer to an interest rate cut

The Bank of England has voted to keep rates at 5.25 per cent – but there are signs that a rate cut may not be far off. The Monetary Policy Committee (MPC) voted 8-1 to hold the base rate. Yet there was a dovish shift in direction compared to the last meeting. In February, the MPC voted 6-3 to maintain rates, with two members voting to raise rates by 0.25 percentage points. Today, no one voted to raise rates – the first time this has happened since 2021. Instead, eight members voted to hold the base rate, while one member voted to reduce rates by 0.25 percentage points.

It was widely expected that the Bank would vote to hold the rate. News earlier this week that inflation slowed again in February, to 3.4 per cent on the year, was certainly a necessary condition for the BoE to consider a rate cut. But Threadneedle Street has been clear for months now that it needs to see evidence that once inflation returns to its target of 2 per cent – which is expected to happen this spring – this can be sustained in the medium term.