The Bank of England has kept UK interest rates at a 16-year high of 5.25 per cent, despite evidence that inflation is slowing significantly.
The BoE has now either increased or kept rates on hold at every meeting for the past four years.
Analysts said the BoE has hinted at rate reductions later in the year but current voting patterns among the members of the rate-setting Monetary Policy Committee (MPC) do not indicate an appetite for lower rates any time soon.
At February’s MPC meeting, only one of them, Swati Dhingra, voted to cut rates, two voted for a rise and the other six said they should stay on hold.
On Wednesday figures from the Office for National Statistics (ONS) showed inflation in the UK fell to 3.4 per cent in February from 4 per cent he previous month, a larger drop than expected, but still above the BoE’s target rate of 2 per cent.
However, many economists now forecast that when the price cap is reduced again on energy prices in April, the effect will be to push inflation below the BoE’s target.
Since the February meeting, figures showed the UK’s economy contracted by 0.3 per cent in December, meaning Britain entered a technical recession.
However, purchase manager data released on Thursday indicated the UK might have already exited that shallow recession.
“Further signs of the UK economy having pulled out of last year’s brief recession are provided by the provisional PMI data for March,” said Chris Williamson at S&P Global Market Intelligence.
The BoE’s action on Thursday mirrored those of the US Federal Reserve the day before, which, while keeping interest rates steady for the fifth straight month, also signalled three cuts before the end of the year.
Also on Thursday, the Swiss National Bank (SNB) made a surprise 0.25 per cent cut, taking the main interest rate to 1.5 per cent.
“The easing of our monetary policy has been made possible because the fight against inflation over the past two and a half years has been effective,” departing SNB chairman Thomas Jordan said.
Updated: March 21, 2024, 12:01 PM
