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Bank of England Holds Interest Rates, Hints at Future Cuts

The Bank of England (BoE) held interest rates steady at 3.75% on Thursday, but signaled that future cuts were likely later in the year. The decision followed a split vote of the decision-making committee, with five members voting to hold and four voting to cut, according to the BBC.

Economists had not predicted a cut after borrowing rates were reduced in December, and against a mixed economic backdrop. Governor Andrew Bailey told the BBC that there was likely to be "some further reduction" in rates later this year.

The Bank also lowered its prediction for economic growth for this year and raised its forecast for unemployment, expectations which make further rate cuts more likely. Bailey said rates were not expected to fall back to the lows seen at the start of the pandemic, which were the "product of exception."

Dharshini David, Deputy economics editor at the BBC, noted that while the Bank of England dangled the possibility of more rate cuts soon, there may not be many more left. Even if another interest rate cut is in the offing, the floor for rates may be looming - to the relief of savers, but meaning there's a sting in the tail for millions of borrowers. The Bank's job is to get inflation to its 2 target - and keep it there. It expects it to fall to that level soon and remain at or a bit below it over the next couple of years. It expects subdued growth and a weak.

While future rate cuts are anticipated, experts caution against expecting mortgage rates to return to the lows seen during the Covid-19 pandemic in 2020.