The Bank of England has held interest rates at 5.25 per cent for the seventh consecutive meeting.
The central bank’s Monetary Policy Committee met today (June 20) and voted by a majority of seven to two to keep rates constant.
Two members voted to reduce the bank rate by 0.25 percentage points to 5 per cent.
The base rate first rose to 5.25 per cent in August and has been held at this rate ever since.
The committee’s report explained: “The restrictive stance of monetary policy is weighing on activity in the real economy, is leading to a looser labour market and is bearing down on inflationary pressures.
“Key indicators of inflation persistence have continued to moderate, although they remain elevated.
“Monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2 per cent target sustainably in the medium term in line with the MPC’s remit.”
John Charcol mortgage technical manager, Nicholas Mendes, said this decision is “no surprise” given the Bank of England’s aim to maintain a neutral stance amid the ongoing general election.
He explained this was because of “persistent inflation” being evident in the underlying figures for services inflation and core inflation despite inflation reaching the 2 per cent mark
“Core inflation has decreased slightly to 3.5 per cent, down from 3.9 per cent in April, showing continued inflationary pressures despite the overall drop in the headline rate,” he explained.
“Concerns about persistent price pressure remain, and with wage growth still at elevated levels, the fallback is likely to be slow in the coming months.
Market Financial Solutions CEO, Paresh Raja, looked ahead to the next decision, predicting a cut in the near future.
He said: “Over the past ten months, as the Bank has decided to keep the base rate at 5.25 per cent on seven consecutive occasions, it has been clear that it will delay cuts for as long as it needs to.
“But with inflation now at 2 per cent, and the European Central Bank having made cuts, the pressure is mounting - all signs suggest that, once election turbulence subsides, the Bank will commence rate cuts, although it's dangerous to take that for granted.
“All eyes will be on its next meeting on 1st August.”
tom.dunstan@ft.com
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