UK interest rates kept at 5.25% as inflation target could be reached by summer
Policymakers on the Monetary Policy Committee voted to hold rates at their near 16-year high for at least another month.
The Bank of England has kept interest rates at 5.25% as it forecast that inflation is set to fall to its target level a year and a half earlier than expected.
Policymakers on the Monetary Policy Committee (MPC) voted to hold rates at their near 16-year high for at least another month, but said how long rates should remain on hold would be kept “under review.”
Although the lack of a cut to rates might hit mortgage holders harder, new inflation forecasts from the Bank could bring some relief to households grappling with the cost-of-living crisis.
The rate of Consumer Prices Index (CPI) inflation is set to fall to 2% between April and June this year, about 18 months earlier than previous forecasts, according to the latest Monetary Policy Report.
Energy prices are expected to be a key driver of the level of inflation throughout the year.
About a third of the impact of higher interest rates is still set to work its way through the economy, due to monetary policy having a delayed effect on households and businesses, according to the Bank.
Just over half of UK homeowners with a fixed-rate mortgage have had to reprice their mortgage deal since rates began rising at the end of 2021.
This leaves about 2.3 million residential mortgage holders still set to see a jump in their repayments over 2024, with about 1.3 million facing an increase of more than £300 a month.
Policymakers are keeping a close eye on economic measures including wage growth, the jobs market, and services inflation.
One member of the nine-person MPC, Swati Dhingra, voted to reduce interest rates to 5%, while two members, Catherine Mann and Jonathan Haskel, wanted to increase rates to 5.5%.
It marked the first time since the start of the Covid-19 pandemic that a member of the committee had voted for a rate cut.
