The Bank of England has held interest rates for the sixth time, at 5.25%.
The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, which is expected to be achieved in the near term, before rising again later in the year.
In line with expectations, at its meeting on 8 May, the MPC voted by a majority of 7–2 to maintain Bank Rate at 5.25%. Two members preferred to reduce Bank Rate by 0.25 percentage points, to 5%.
Anna Leach, Deputy Chief Economist, CBI, said: “Today’s vote 7-2 to hold rates is in line with the CBI’s expectation that the MPC want to see more evidence that past falls in domestic inflationary pressure are sustainable before they’ll move to cut rates.
“Services inflation and wages data both suggest a cautious approach is warranted. Inflation in the services sector is triple the inflation target and average earnings growth is still running at around double the rate consistent with the inflation target.
“With the economy appearing to be moving out of recession – albeit anaemically – there is a delicate balance to be struck between managing inflationary pressures and not snuffing out a nascent recovery.
“It is noteworthy that the Bank judge that demand growth is going to run behind supply growth over the next couple of years. Overall, today’s release does not change our view that the first rate cut is most likely to be in August.”
