Bank of England set to hold rates as inflation rise cools cut expectations

"The Bank of England is widely expected to keep interest rates on hold this week after inflation rose for the first time in five months, although markets believe the door remains open to a cut later in the spring. Analysts expect the Bank's Monetary Policy Committee (MPC) to vote to maintain the base rate at 3.75 per cent when it announces its decision on Thursday."

"The nine-member MPC has been closely divided in recent meetings, reflecting differing views over whether inflation is set to fall back quickly or remain stubbornly high. In December, the committee voted 5-4 in favour of a cut, with governor Andrew Bailey casting the deciding vote. Analysts at UBS said they expect Bailey to back a hold this time. "After swinging the vote in favour of a cut in December, it is likely governor Bailey will vote for keeping rates on hold," the bank said."

The Bank of England is expected to maintain the base rate at 3.75 per cent at the upcoming MPC decision. The rate sits at a three-year low after four quarter-point cuts last year that reduced borrowing costs from 5.25 per cent. Inflation climbed to 3.4 per cent in December, the first rise in five months and above the 2 per cent target, prompting near-term caution. Markets continue to price in two cuts this year, possibly starting in March. The nine-member MPC remains closely divided, and major forecasters expect a hold this week.

Read at Business Matters