Bank of England holds rates at 4.25%, but hints at cuts this year

The Bank of England left interest rates on hold at 4.25% yesterday, though it signalled further cuts in the cost of borrowing later this year after "clearer evidence" of rising unemployment amid a slowing economy.

- Phillip Inman Heather Stewart

Six members of the Bank's nine-member monetary policy committee (MPC) voted to keep rates on hold while three supported a reduction to 4%, to add to the four quarter-point cuts since last August.

The Bank's governor, Andrew Bailey, said interest rates "remain on a gradual downward path" after "seeing signs of softening in the labour market". He cautioned, however, that the world was "highly unpredictable" and it was difficult to predict when interest rates would next be reduced.

Financial markets expect the MPC to reduce rates at its next meeting in August, and again to 3.75% before the end of the year.

The economy shrank by 0.3% in April after a 0.7% boost in the first three months of the year, indicating a significant cooling in the outlook for growth in national output, or gross domestic product (GDP). Vacancy rates have plummeted to pre-pandemic levels, unemployment has increased and wages growth has slowed.