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Interest rates have remained unchanged at 5.25% for the seventh consecutive month, the Bank of England has announced. The bank’s MPC voted by a majority of 7–2 to maintain the rate, despite inflation hitting its target and falling to 2% in May.
UK inflation hit its target for the first time in almost three years, as consumer price inflation eased to 2% in the year to May, down from a rise of 2.3% the prior month. The Bank of England last hit the 2% target in July 2021.
According to the Office for National Statistics, the decline was largely thanks to falling food prices, with prices falling this year but rising a year ago.
The committee sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment.
In addition to falling inflation, UK GDP appears to have grown more strongly than expected during the first half of this year. However, according to the BoE, business surveys remain “consistent” with a slower pace of underlying growth, of around ¼% per quarter.
While inflation now sits at 2%, the BoE said that monetary policy will need to remain “restrictive for sufficiently long” to return inflation to the 2% target “sustainably” in the medium term.
