The Bank of England kept its key interest rate at 4.25 percent on Thursday, with lingering fears of a revival of inflation outweighing fears that the U.K. economy is slowing.
While inflation has come down markedly from its peak over 11 percent in 2023, it is still above 3 percent and likely to stay there for most of the year. With the Israel-Iran conflict having pushed oil prices higher again in recent days, the Bank stressed that the risks to inflation “remain two-sided”.
“Given the outlook, and continued disinflation, a gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate,” it said.
However, three of the nine-strong Monetary Policy Committee — Deputy Governor Dave Ramsden and external members Alan Taylor and Swati Dhingra — voted against the decision, arguing for an immediate quarter-point cut in the Bank Rate.
The choice of “gradual and cautious” has been taken by the markets to mean no more than one cut every quarter, which is the rhythm the Bank has kept so far this year with cuts in February and May. Analysts expect the next cut to come at the Bank’s next Monetary Policy Committee meeting in August.
