The decision was widely expected after the Bank cut rates from 4% in December. Governor Andrew Bailey reiterated his view that inflation—measuring the pace of price growth—is set to fall close to the Bank’s 2% target from April onwards, much earlier than its previous projection of 2027, News.Az reports, citing BBC.
“That’s good news,” Bailey said. “We need to make sure that inflation stays there. All going well, there should be scope for some further reduction in Bank Rate this year.”
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The Bank said measures announced in the government’s Budget, including cuts to household energy bills, alongside lower wholesale gas prices, are expected to help ease inflationary pressures.
However, the central bank downgraded its outlook for economic growth. It cut its forecast for UK growth in 2026 to 0.9%, down from the 1.2% projected last November.
The unemployment rate is also now expected to rise this year, with the Bank revising its estimate up from 5% to 5.3%.
The decision to hold rates proved finely balanced. Four of the nine members of the Monetary Policy Committee voted for a quarter-point cut that would have lowered the rate to 3.5%.
