The Bank of England's Monetary Policy Committee has voted to hold the base rate at 4.25%, while forward guidance language suggested a potential rate cut as early as June 2026 should inflation continue its downward trajectory.
The decision, supported by a 7-2 majority on the committee, reflects a cautious approach as policymakers balance slowing economic growth against persistent services inflation, which remains above 3%.
"The direction of travel is clear, but the timing must be guided by evidence," said the Bank's Governor in a post-decision press conference. "We are encouraged by the progress on headline inflation but remain vigilant about underlying price pressures in the services sector."
Markets have now priced in a 78% probability of a 25 basis point cut at the June meeting, with expectations of a total of 75 basis points in easing by year-end.
The decision comes as the European Central Bank and Swiss National Bank have already commenced their respective easing cycles, putting additional focus on the Bank of England's relative position.