The Institute of Economic Affairs has voiced its dissent regarding the Bank of England’s Monetary Policy Committee (MPC) decision to maintain the base rate at 5.25%.

Today, the Bank of England voted 7-2 to keep the base rate steady, a rate that has held firm since August 2023.

This decision comes on the heels of promising news: inflation has finally hit the Bank’s 2% target this week, and unemployment has reached 4.4%. These developments led some analysts to anticipate the first rate cut since before the pandemic.

Julian Jessop, economics fellow at the free-market think tank, the Institute of Economic Affairs, remarked, “The Bank’s decision to leave interest rates on hold despite inflation falling to target is not unreasonable, but it is still wrong.

“There is already plenty of evidence that underlying cost pressures are easing. The longer the Bank waits, the greater the risk that inflation undershoots the target while unnecessarily holding back the recovery.

“Most Monetary Policy Committee (MPC) members are not yet confident that pay pressures and services inflation have slowed sufficiently to sound the ‘all clear’. There is a risk that inflation could rise again in the second half of the year.

“It would be unfair to accuse the Bank of political bias. But the view of the markets may have influenced the decision. The MPC could have wanted to avoid the perception of bias if they had surprised investors by cutting rates so close to an election.

“An August rate cut is still very much in play. The statement noted that a new set of forecasts will allow a more detailed assessment of the risks of inflation persisting. Even some MPC members who voted for no change this week acknowledged that their decision was finely balanced.”