Despite a decrease in inflation to 3.4 per cent in February, marking the lowest rate since September 2021, when it stood at 3.1 per cent, the Bank of England has opted to maintain its current interest rates. This decision was announced prior to the release of the BoE's latest interest rate decision at noon, with policymakers choosing to keep rates steady at 5.25 per cent.
Following the decision, BoE governor Andrew Bailey said: “In recent weeks we’ve seen further encouraging signs that inflation is coming down.
“We’ve held rates again today at 5.25% because we need to be sure that inflation will fall back to our 2% target and stay there.
“We’re not yet at the point where we can cut interest rates, but things are moving in the right direction.”
Chancellor Rishi Sunak has received a boost from the decrease in inflation, with Chancellor Jeremy Hunt suggesting that the brighter economic outlook may pave the way for pre-election tax cuts and interest rate reductions.
Marion Amiot, senior European economist at S&P Global Ratings on the decision: “The Bank of England will need to see a lot more moderation in wages and services prices before it starts cutting rates. We don’t expect that to be before August as the labour market remains tight.
“While vacancies are falling, the workforce is barely expanding, supporting pay increases that are well above productivity gains and the 2% inflation target.”