The Bank of England has been accused of putting caution before growth as it held interest rates at 5.25pc.
The Monetary Policy Committee (MPC) left borrowing costs unchanged for a fifth consecutive meeting but for the first time since September 2021, no-one voted for an increase in rates. One member voted for a cut in an 8-1 split.
Money markets have priced in three quarter of a percentage point reductions in borrowing costs by the end of the year as Governor Andrew Bailey said “things are moving in the right direction”.
Traders put the chances of a first rate cut in June at about 80pc.
However, economists said policymakers were being “overly cautious” after inflation fell sharply to 3.4pc last month - with many forecasting it will drop to 2pc in April.
Julian Jessop of the Institute of Economic Affairs think tank, said the decision was “disappointing” but welcomed hints that cuts are “coming soon”.
Mr Jessop said: “The big picture is still that monetary policy is too tight and the Bank has been too slow to cut rates. Nonetheless, the shift in tone today is important.”
Suren Thiru, economics director at ICAEW, said: “The Bank of England remains overly cautious on the prospect of rate cuts given the startling inflation slowdown and an economy in recession, increasing the risk they prolong our economic struggles by keeping policy too tight for too long.”
Neil Shah, director at investment researcher Edison Group, said the Bank of England has prioritised “inflation management over immediate economic stimulus”.
He added: “It appears that, in the delicate balancing act between supporting recovery and curbing inflation, the Bank is choosing caution, potentially at the expense of growth opportunities.”
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