LONDON: The Bank of England on Thursday held its key interest rate at a 16-year high, opting against a reduction as inflation remains elevated despite recent slowdowns.

But BoE governor Andrew Bailey signalled a rate-reduction later this year as inflationary pressures ease further.

The British central bank kept its key rate steady at 5.25 per cent, mirroring a similar decision by the US Federal Reserve on Wednesday.

The BoE rate call came one day after official data showed that UK annual inflation slowed more than expected, fuelling speculation that it would start cutting borrowing costs in the summer.

Inflation hit a near-2.5-year low of 3.4pc in February.

That marked a slowdown from 4pc in January and beat economists’ expectations of 3.5pc, but it remains stubbornly above the BoE’s official 2pc target level.

“In recent weeks we’ve seen further encouraging signs that inflation is coming down,” Bailey said in remarks published alongside the decision.

“We’ve held rates again today at 5.25pc because we need to be sure that inflation will fall back to our 2pc target and stay there.

Published in Dawn, March 22nd, 2024