The Bank of England maintains interest rates at their current levels as anticipated.

The Bank of England (BoE) has opted to maintain its main interest rate at 5.25%, holding steady at a 16-year high just before the July 4 election. This decision, endorsed by a 7-2 vote from the Monetary Policy Committee (MPC), corresponds with forecasts from economists. BoE Governor Andrew Bailey stressed that despite recent data showing inflation hitting the 2% target, it’s premature to consider rate cuts. The central bank is awaiting more consistent evidence of sustained low inflation before considering any adjustments to monetary policy.

In response to the announcement, the British pound weakened against the US dollar, indicating market expectations of a potential rate cut sooner than anticipated. The likelihood of a quarter-point cut by the September meeting has increased following the BoE’s decision.

This move by the BoE stands in contrast to the recent rate cut by the European Central Bank and the prevailing expectation that the US Federal Reserve will delay any reduction in borrowing costs until later in the year. Although many economists foresee a rate cut at the BoE’s next policy meeting in August, they acknowledge that future decisions will be heavily influenced by forthcoming economic indicators.

The timing of any rate adjustment is expected to carry political weight. Prime Minister Rishi Sunak’s Conservative Party is currently lagging behind the opposition Labour Party by approximately 20 points in pre-election polls. While Sunak has sought to claim credit for the decline in inflation during his tenure, Labour attributes high mortgage rates to economic mismanagement.