Bank of England keeps rates on hold but signals future cuts

Bank of England policymakers have left interest rates unchanged at 3.75% but indicated that lower inflation as a result of cost of living measures in Rachel Reeves’s budget should pave the way forcutsin the months ahead.

- Heather Stewart Economics editor

The nine-member monetary policy committee (MPC) voted to leave borrowing costs on hold, despite forecasting weaker growth and lower inflation thanatits last quarterly forecast in November.

Butthenarrowerthan expected 5-4 split in the MPC’s voting suggested further reductionsin borrowing costs are to come. The committee has cut rates six times since mid-2024.

Andrew Bailey, the Bank’s governor, who voted to hold rates, said: “We now think that inflation will fall back to about 2% by the spring. That’s good news. We need to make sure inflation stays there, so we’ve held rates unchanged at 3.75% today. Allgoing well, there should be scope for some further reduction in bank rate this year.”

Inits latest monetary policy report, published alongside yesterday’s decision, the MPC projected gross domestic product would grow by 0.9% this year, down from the 1.2% it was expecting three months ago.