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<\/p>\nThe Bank of England kept interest rates on hold today, but only after an unexpectedly narrow 5-4 vote, and it said it expected a future cut if a sharp fall in inflation due in the coming months proved not to be a blip.<\/p>\n
Despite a big reduction to its forecast for Britain’s economic growth this year and a rise in unemployment, the Bank of England left its benchmark Bank Rate at 3.75%.<\/p>\n
The decision was in line with almost all forecasts in a Reuters poll of economists ahead of the February meeting of Monetary Policy Committee.<\/p>\n
However, the poll had pointed to a more emphatic 7-2 vote in favour of no change in rates.<\/p>\n
Governor Andrew Bailey was one of the five MPC members who backed the “hold” decision. He said his position was likely to change if a forecast fall in inflation to the Bank of England’s 2% target from April looked sustainable.<\/p>\n
“We need to make sure that inflation stays there, so we’ve held rates unchanged at 3.75% today,” Bailey said in a statement. “All going well, there should be scope for some further reduction in Bank Rate this year.”<\/p>\n
He stressed he did not have any specific date in mind for the next rate cut, but the narrower-than-expected vote may prompt investors to bring forward their bets on the Bank of England’s next move.<\/p>\n
Before today’s announcement, rate futures markets were pricing little chance of a cut in March and only a roughly 60% chance of one in April.<\/p>\n
The Bank of England has been moving cautiously as Britain has the highest inflation rate among the world’s big, rich economies.<\/p>\n
It cut rates four times in 2025 including a quarter-point reduction in December which was backed by a 5-4 vote.<\/p>\n
But policymakers have stressed they need to move carefully as they approach the level of borrowing costs that is neither inflationary nor a drag on an economy still struggling to overcome the after-effects of Brexit, the Covid pandemic and the 2022 surge in energy prices. <\/p>\n
<\/p>\n
The European Central Bank is widely expected to keep its benchmark borrowing rate at 2% – almost half that of the Bank of England – later today.<\/p>\n
The Bank of England said it now expected inflation to slide to around its 2% target in April – helped in large part by measures included in finance minister Rachel Reeves’ budget in late November – much sooner than in its early November forecast.<\/p>\n
But the central bank stressed it wanted to make sure the fall was not a one-off.<\/p>\n
Its staff forecasts show inflation dropping below its target to 1.7% before hovering around its 2% target from the second quarter of next year through to the end of its three-year forecast period.<\/p>\n
Three of the five MPC members who backed no cut this week – chief economist Huw Pill, deputy governor Clare Lombardelli and external member Megan Greene – acknowledged inflation pressures were weakening but favoured “a more prolonged period of policy restriction” to ensure inflation does not get stuck too high.<\/p>\n
Bailey and Mann said evidence to support a further cut was increasing, but not yet sufficient.<\/p>\n
The four who backed a cut – deputy governors Dave Ramsden and Sarah Breeden plus Swati Dhingra and Alan Taylor – were more worried about inflation falling too low as the economy weakens.<\/p>\n
The Bank of England cut its forecast for economic growth for 2026 to 0.9% from a previous estimate of 1.2% before a pickup in 2027 and 2028. It also raised its forecast for the peak in unemployment to 5.3%, up from 5.1% previously.<\/p>\n
Despite the slowdown in the economy, private-sector regular wage growth is likely to decelerate only slowly this year, dropping to an annual rate of 3.3% by the end of 2026 from 3.4% in late 2025.<\/p>\n
The Bank of England said a roughly 3.25% rate of pay growth was consistent with on-target inflation.<\/p>\n
A Bank of England survey published alongside today’s decision showed companies expected pay settlements of 3.4% this year, down from 4% in 2025.<\/p>\n
The MPC left its guidance about the outlook for interest rates largely similar to its message after its previous meeting in December.<\/p>\n
“On the basis of the current evidence, Bank Rate is likely to be reduced further,” it said in a statement.<\/p>\n
“Judgements around further policy easing will become a closer call. The extent and timing of further easing in monetary policy will depend on the evolution of the outlook for inflation,” it added.<\/p>\n","protected":false},"excerpt":{"rendered":"The Bank of England kept interest rates on hold today, but only after an unexpectedly narrow 5-4 vote,…\n","protected":false},"author":2,"featured_media":282114,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[72,113,61,60],"class_list":["post-282113","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-ie","tag-ireland"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/282113","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=282113"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/282113\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/282114"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=282113"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=282113"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=282113"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}