Bank of England maintains policy rate at 16-year high

The Bank of England left its benchmark interest rate unchanged at a 16-year high of 5.25% at its policy meeting in May, in line with market expectations.

Yet, it became clear that two Monetary Policy Committee members had voted in favor of a 25 basis point rate cut.

Borrowing costs have now been left on hold at six consecutive meetings, but policy makers hinted that the first rate cut since March 2020 at the onset of the coronavirus pandemic could come as early as June.

The BoE noted it would be closely monitoring upcoming macro data.

“The Committee will consider forthcoming data releases and how these inform the assessment that the risks for inflation persistence are receding,” the Bank of England said.

“On that basis, the Committee will keep under review for how long Bank Rate should be maintained at its current level.”

The central bank said it expected CPI inflation to ease close to its 2% target in the near term, with potential risks stemming from geopolitics.

A strong UK wage growth and still-elevated services inflation may also pose a threat of driving inflation above the 2% target.

Meanwhile, the BoE revised up slightly its UK GDP growth forecast, as it now expects a 0.5% growth in 2024 compared to a 0.25% expansion projected in February.

The British Pound steadied against the Euro on Thursday, after the EUR/GBP currency pair advanced to a fresh two-week high of 0.8620 immediately after the policy announcement.