The Bank of England has indicated a potential reduction in interest rates, following its projection that inflation is likely to dip below 2% in the coming months. This forecast comes even though the Bank has maintained the current borrowing rate at 5.25% for the fourth time in a row.
The decision to keep the interest rates stable was largely anticipated. The monetary policy committee of the Bank, with a majority vote, chose to maintain the rate at its current level.
A significant revision in the inflation outlook has been made by the Bank, expecting a decrease to under 2% as soon as May. This would mark the first occurrence of such a low rate since early 2021. However, there is an expectation of a rebound in inflation later in the year, attributed to strong wage growth within the UK economy and diminishing effects from reduced energy costs.
Prior to the announcement, financial markets had already anticipated that the interest rates would remain steady, given the recent gradual decrease in inflation.
Since September, the Bank has not altered borrowing costs, pausing what had been its most intensive rate-hiking phase in many years. The central bank had previously raised rates from a historic low of 0.1% in December 2021, which impacted the cost of mortgages and loans for numerous households.
