The Bank of England’s monetary policy committee maintained the U.K.’s national interest rate at 5.25%, with Governor Andrew Bailey noting that "things are moving in the right direction" in terms of coming to the point where rates can eventually be cut.
The committee voted by a majority of 8-1 for the hold. One member preferred to reduce the rate by 0.25 percentage points, to 5%.
The pause followed official data showing that U.K. inflation was 3.4% for the year to February, down from 4% in January.
“We're not yet at the point where we can cut interest rates, but things are moving in the right direction," Bailey said in a press conference.
Money managers said rate cuts are getting closer. "It is quite clear that the MPC are closer to cutting rates than the market appreciated, certainly a few days ago when the first cut wasn't priced until August," said Jamie Niven, a senior fund manager at asset management firm Candriam, in an emailed comment.
Niven said the "phraseology of Bailey's statement," as well as two committee members moving to hold rates from their votes in February to increase rates, "is clearly dovish relative to expectations and while markets are now pricing June for a first cut, I wouldn’t exclude the possibility of it coming in May," Niven said.
Gabriella Dickens, G7 economist at AXA Investment Managers, said in an emailed comment that the hold was with expectations of the market and AXA executives, and that the firm expects a first cut in June followed by two more in November and December.
Elsewhere in Europe, Norges Bank’s monetary policy and financial stability committee opted to keep Norway’s national interest rate unchanged at 4.5%. As in the U.K., the nation’s operational target of inflation is around 2% long term. In Norway, it currently stands at nearly 5%.
The Swiss National Bank cut its key policy rate by 0.25% to 1.5% in response to a significant drop in inflation, strong Swiss franc appreciation, and below-trend growth. Swiss CPI showed 1.2% inflation for February, below the SNB’s own 2% target range.
