LONDON (dpa-AFX) - The Bank of England maintained its interest rate in a close decision on Thursday and signaled rate cut as inflation is expected to fall back in the near term.
The Monetary Policy Committee, governed by Andrew Bailey, voted 5-4 to hold the bank rate at 3.75 percent, which was the lowest since early 2023.
The restrictiveness of policy has fallen as Bank Rate has been reduced by 150 basis points since August 2024, the bank said in a statement.
'On the basis of the current evidence, Bank Rate is likely to be reduced further,' the bank said.
Judgments around further policy easing will become a closer call and the extent and timing of further easing will depend on the evolution of the outlook for inflation, the MPC added.
At the meeting, a majority of MPC members observed that progress in disinflation had continued but they concluded that the weight of evidence was not yet sufficient to warrant reducing the rate.
Meanwhile, four members voted to reduce the rate by a quarter-point to 3.50 percent. These members said monetary policy was still too restrictive, and a further cut in Bank Rate was warranted at this meeting.
Although inflation stays above the 2 percent target, it is forecast to fall back to around the target from April, the MPC said. Pay growth and services price inflation continued to ease.
Accordingly, policymakers viewed that the risk from greater inflation persistence has continued to become less pronounced, while some risks to inflation from weaker demand and a loosening labor market remain.
'The latest decision is more about erring on the side of caution, rather than calling time on the easing cycle altogether,' Confederation of British Industry Deputy Economist Alpesh Paleja said.
'Holding the interest rate at 3.75% was expected as the Bank grapples with the twin challenges of domestic cost pressures and an unpredictable global outlook,' said British Chambers of Commerce Head of Research David Bharier.
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