The Bank of England keeps the interest rate unchanged at 5.25 percent – E24

The Central Bank of Great Britain is not making any interest rate moves this time either.

It was expected in advance that the Bank of England would keep the interest rate unchanged at 5.25 percent.

It is the sixth meeting in a row without an adjustment of interest rates in the UK.

Seven out of nine members of the interest rate committee voted to keep the interest rate unchanged, while two voted to cut the interest rate to 5.0 percent.

Inflation in the UK has slowed in recent months, but is still higher than desired.

Price inflation came in at 3.2 per cent in March, while core inflation landed at 4.2 per cent, according to figures from the statistics authorities.

The Bank of England’s inflation target is, as in Norway and several other places, two percent.

– Monetary policy will ensure that inflation comes down to the target of two per cent in a sustainable way in the medium term, writes the Bank of England in a press release.

The central bank estimates that will fall to below two per cent in around two years, while it will fall further to 1.6 per cent within three years, they write.

– Optimistic

The Bank of England reiterates that it will continue to monitor new economic data closely.

– We need to see more evidence that inflation will remain low before we can cut interest rates, says central bank governor Andrew Bailey in a statement, according to Bloomberg.

– I am optimistic that things are going in the right direction, he adds.

Marius Gonsholt Hov, chief economist at Handelsbanken, interprets the signals from the BoE as “due”, and says that the market is primarily waiting for the press conference afterwards.

– If we look at the interest rate market, it is slightly down, where the market fully prices a cut in August, and 50/50 for a cut already in June. But it’s pretty much the same as at the front, he writes in a message to E24.

Several believe that the Bank of England is moving closer to cutting interest rates, as one other member of the interest rate committee voted for an interest rate cut during the May meeting.

– Disagreement from an internal member is quite rare and should be taken as a strong signal that the Bank of England is ready to cut interest rates, says Michael Brown, strategist at Pepperstone Group Ltd. in London, according to Bloomberg.

Not sure when the cut will come

– We expect that the interest rate committee will have to see a further decline in wage growth and inflation in the service industry before they consider an interest rate cut. Such a development will probably take time, wrote DNB Markets in an update signed by senior economist Knut A. Magnussen, ahead of the interest rate decision.

DNB Markets does not expect the Bank of England to cut interest rates until November, according to the update.

– Bailey’s comments will be important, along with the outlook forecast, says Francesco Garzarelli, head of research at Eisler Capital, to CNBC.

At the previous interest rate meeting in March, eight out of nine members of the committee voted to keep the interest rate unchanged, while one member voted to cut it to 5 percent.

Therefore, any split between the members of the interest rate committee will be closely monitored, in order to get hints about a possible cut in June.