Bank of England expected to keep interest rates the same

The Bank of England is expected to leave UK interest rates unchanged on Thursday, but how soon it can begin cutting borrowing costs will be in sharp focus as the country balances on the cusp of a recession.

Decision-makers on the Bank’s Monetary Policy Committee (MPC) are widely expected to keep interest rates at 5.25% for the fourth time in a row.

Experts said the MPC could use Thursday’s announcement to hint at the possibility of interest rates being cut later this year.

It would bring some relief to businesses and household borrowers who have seen costs go up steadily from lows of 0.1% at the end of 2021 to the highest rate for nearly 16 years.

UK economic growth has also stagnated amid tighter lending conditions, and official figures released in February could reveal the country dipped into a technical recession at the end of last year, which is defined as two consecutive quarters of negative growth.

“The Bank of England’s updated narrative is likely to be that clear progress is being made on inflation, but that it is too early to declare victory and therefore caution must be exercised when thinking about when and how quickly policy can be normalised,” he said.

Sanjay Raja, a senior economist for Deutsche Bank, said he thinks it could be a unanimous vote on the nine-person committee to keep rates at 5.25%.

Mr Raja also said there is likely to be a big change in the MPC’s projections for inflation returning to its 2% target, which could be achieved about 18 months earlier than previously forecast.

The MPC could begin lowering interest rates as early as May, he estimated.

The Bank will publish its latest Monetary Policy Report at the same time as the rates decision, where its outlook for inflation and economic growth will be in sharp focus.