Interest rates held at 5.25% but BoE 'optimistic' about cuts

THE Bank of England has decided to keep UK interest rates unchanged, but gave a new sense of optimism that borrowing costs could soon be cut if inflation is reined in.

While the central bank voted to hold rates at 5.25%, governor Andrew Bailey said he is 'optimistic that things are moving in the right direction. Mr Bailey said there has been 'encouraging news' on inflation, which the Bank expects to come close to its 2% target between April and June.

But he added: "We need to see more evidence that inflation will stay low before we can cut interest rates." In a strong signal that the tide is turning among the rate-setters, two members of the Bank's nine-person Monetary Policy Committee (MPC) voted for interest rates to be cut by 0.25 percentage points, to 5%.