Interest rates held at 5.25%

The Bank of England has confirmed that interest rates will remain at 5.25%, highest level for 16 years.

At its latest meeting, the Bank’s nine-member Monetary Policy Committee (MPC) voted by a majority of 7–2 to maintain the base rate at 5.25%. Two members voted for a quarter-point reduction to 5%.

It’s the seventh time in a row that interest rates have been left unchanged.

Inflation data published on Wednesday showed that UK consumer price inflation eased to 2% in the 12 months to May, reaching the Bank of England’s target for the first time in nearly three years.

The MPC noted that indicators of short-term inflation expectations have continued to moderate, particularly for households. While services inflation remained high at 5.7% in May, the Committee said that this was partly a reflection of prices that are index-linked or regulated, such as broadband and mobile bills, which are typically changed only once per year.

Bank of England governor Andrew Bailey said: “It’s good news that inflation has returned to our 2% target.

“We need to be sure that inflation will stay low and that’s why we’ve decided to hold rates at 5.25% for now.”

The next decision on interest rates is due to be announced on 1 August, with expectations for a reduction in either August or September.