Governor Bailey adds: "If we were to keep [the] bank rate at 5.25% for the next three years, we think it's likely that inflation would eventually fall significantly below target."

He says that the Bank needs to keep "monetary policy sufficiently restrictive for sufficiently long, nothing more, nothing less" to tackle higher prices.

He's referring to interest rates as one of the key tools that the Bank of England has when it comes to bringing inflation down. In theory, by making borrowing more expensive and dissuading people from taking out loans, higher interest rates cool down the economy, easing pressures pushing up prices.

He says the future path for interest rates essentially depends on the numbers.

Key data about the state of the UK economy - wage growth, job vacancies and more - will determine what the Bank of England decides to do.

Bailey explains that when the interest rate was raised last time, it was to prevent second-wave shocks from taking hold.

The Bank’s approach is proving to work he says, but services price inflation remains elevated.

“It’s not as simple as inflation returns to target in the spring, and the job is done,” Bailey says, while highlighting the challenges ahead for the year.

Future prices for oil and gas suggest that the Bank isn’t predicting major falls, he notes.

Looking ahead to the second half of the year, the negative contributions from energy prices are “likely to fade”. That will, he says, push headline inflation back up somewhat.

The energy component is a major factor, he emphasises, while directing attention to a chart that shows how intimately linked overall inflation is with energy prices.

Dearbail Jordan
Business reporter

Andrew Bailey says that food and energy prices are no longer pushing inflation higher like they were before, particularly in the wake of Russia's invasion of Ukraine.

In fact, oil and gas prices have been falling.

But it’s not all plain sailing.

He says there are indications that we should not expect further big falls in oil and gas prices - and that’s what could keep inflation above the Bank’s 2% target after it falls to around that level between April and June this year.

The governor says "price stability" is the key to a healthy economy and that we must get inflation down to 2% "sustainably".

He describes the outlook for inflation: "We expect consumer price inflation to continue to fall over the coming months."

He says it may tick up slightly in January's inflation rate but by time we get to March inflation it is predicted to be around 3%, and by April, May and June he says it will be close to 2%.

Bailey says inflation is expected to increase in the second half of the year.

"Inflation is coming down primarily because the global inflationary shocks have been abating," he adds.

Kicking off the Bank of England press conference, Governor Andrew Bailey says that there has been "some good news" over the last few months.

"Inflation has fallen a long way from 10% a year ago to 4% now - things are moving in the right direction."

But, he adds: "We have to more confident inflation will fall all the way back to the 2% target and stay there. We're not yet at the point where we can lower interest rates."

Image source, EPA

The governor of the Bank of England is holding a press conference.

Stay with us as we bring you all the latest lines.

You can also watch it live by pressing Play at the top of the page.

Lora Jones
Business reporter, BBC News

Today, as well as the interest rate decision, we got what's known as the Bank of England's inflation report.

It says that it expects inflation – which measures the pace of price rises – to fall much more quickly this year.

It's currently predicting that inflation will fall back to its target of 2% between April and June this year, before picking up again.

But lower inflation doesn't mean that prices drop - it means that they rise less quickly.

And there is still a question mark on when that will start feeding into interest rates.

The governor of the Bank of England, Andrew Bailey says: “We need to see more evidence that inflation is set to fall all the way to the to the 2% target, and stay there, before we can lower interest rates.”

Read more about what inflation means for you here.

A change in tonepublished at 12:23 Greenwich Mean Time 1 February

12:23 GMT 1 February

Dharshini David
Chief economics correspondent

We've just heard there will be no change in the base rate – but there is a noticeable shift in tone as the panel moved away from touring the possibility of further rises to discussing the feasibility of cuts.

Inflation has fallen more rapidly in recent months than the Bank had previously expected.

But while lower energy costs could drive inflation even lower in coming months, the Bank isn’t ready to cut rates yet. Indeed, two members of the panel did vote for a hike.

What the Bank wants is to see a more pronounced easing of inflation in services – such as restaurant meals - and wage growth, as it fears a rate cut that would put more money in people's pockets could risk reigniting inflation.

So economists think the first cut will likely come this summer. In the meantime, homeowners rearranging mortgages will still likely see a jump in repayments.

A quick summary:

• The Bank of England has left UK interest rates unchanged
• Its base rate has been held at 5.25%, but it admitted it had discussed cutting rates
• There was a three-way split, with two members of its Monetary Policy Committee wanting to increase the bank rate to 5.5%. One wanted to reduce it to 5%, while six were in favour of the hold

Three-way split on rates pathpublished at 12:09 Greenwich Mean Time 1 February

12:09 GMT 1 February

Faisal Islam
Economics editor

Interest rates have peaked and the next move will be a cut, but that could still be some months away, even as inflation will soon fall to the 2% target. That is the broad message from the Bank of England, as one of its rate-setters on its Monetary Policy Committee (MPC) made their first vote for a cut since the pandemic.

The Bank abandoned language about “further tightening in monetary policy” that had been criticised in the markets as unrealistic.

It is now talking about rate cuts, something the governor said was not happening last month. But the conversation may last some months yet. The tanker is being turned around from fears about inflation to concerns about the economy. But that is a choppy process, and for the first time since the financial crisis in 2008, there has been a three-way split on whether rates should rise or fall.

While a single member of the committee committed the first vote for a rate cut since the onset of the pandemic nearly four years ago, the governor’s message is that the Bank will wait until there is firm evidence that inflation has fallen to 2% “and stays there” before it cuts.

Indeed two members voted for another rise to 5.5%. The fear is that the fall to target or below is “artificial” - caused by the cut to the energy price cap, and that inflation will rebound somewhat over the summer as global energy prices have picked up.

On top of that the Bank’s survey of hundreds of companies pointed to a 5.4% rise in wage settlements this year.

Swati Dhingra, the economist who voted for a cut, pointed to risks from geopolitics, and the fact it takes a long time for decisions to affect the economy. The Bank’s new forecasts show that keeping rates at their current rate could push a barely growing economy into an outright recession.

UK interest rates have been left unchanged at 5.25% by the Bank of England in a move economists had expected.

It is the fourth time in a row the Bank has held rates.

It had previously raised rates 14 times in a row to tame inflation, leading to increases in mortgage payments but also higher savings rates.

With the Bank's decision imminent, here's how the rate has changed in recent years...

Image source, .

Image source, PA Media

While we wait for the Bank of England to announce its decision on the interest rate, Shadow Chancellor Rachel Reeves says there will be no rise in the current 25% rate of corporation tax during the first term of a Labour government.

The announcement comes during the Labour Party Business Conference in London, where Reeves has accused the Conservatives of presiding over a decade of chaos and instability.

She says that Labour's offer is "a genuinely pro-business tax plan" which is founded on a fair contract between "a pro-business government and great British business".

Dearbail Jordan
Business reporter

It is worth remembering that translating the language the Bank of England uses in relation to the base rate is an art in itself.

For instance, when the Bank made its December announcement, it described it as such: “Further tightening in monetary policy would be required if there were evidence of more persistent inflation pressures.”

What that jargon loosely translates to is that the Bank might have to raise the interest rate if inflation – how we measure the pace at which prices are rising – doesn’t slow down.

The Bank also talks a lot about its “target”. That refers to its remit to keep inflation at 2%, a low and stable rate that the government says should allow people to plan for their future.

For our purposes today, those are the key things we’ll be helping to decipher.

Dearbail Jordan
Business reporter

Good morning from outside the beautiful Bank of England building from where I’m about to descend into the decidedly less beautiful Bank of England basement.

My job is to write about the latest interest rate decision.

And this time around, it’s going to be supersized because the Bank is also publishing its quarterly Monetary Policy Report - colloquially known as the Inflation Report.

We journalists get to read the interest rate decision and Inflation Report before they are released to the public but, to prevent leaks, it means we’re literally locked in the bowels of the Bank for two hours.

We shut away our phones in lockers - but we’re allowed to take in our laptops - before being herded to a room where tea and coffee are laid on.

Though there’s not much in the way of biscuits these days.

Anyway, at a few seconds to midday we get the Wi-Fi password and send our copy ready for you to read as the clock strikes 12:00.

Then it’s off to the press conference where we get to grill the Bank’s governor.

See you on the other side.

Image source, Getty Images

The Bank of England is the UK's central bank and is independent from the government.

It's the main issuer of sterling and its “mission”, in its own words, is to “maintain monetary and financial stability for the good of the people of the United Kingdom”.

In doing so, one of its main jobs is to keep inflation, which is the rate at which prices rise, at its target rate of 2% - currently inflation is double that at 4% in the year to December.

Another of its main roles is to set interest rates - which it uses a tool to try to control inflation.

The Bank’s Monetary Policy Committee meets eight times a year to discuss and set interest rates. It has nine members, including the Governor Andrew Bailey.

Of the nine members, five are appointed by the Bank and the remaining four are external appointments made by the Chancellor.

Read more about the Bank of England here.

• The rate at which prices are rising unexpectedly ticked up to 4% in December, from 3.9% in November, according to official figures
• A big factor was a rise in tobacco and alcohol prices, the Office for National Statistics said. Higher tobacco duty pushed up the price of cigarettes in comparison with the year before
• “Core inflation”, which strips out the price of energy, food, alcohol and tobacco remained steady at 5.1% in the year to December
• The Bank of England looks at this number among others when making its decision on interest rates
• In January 2023, Prime Minister Rishi Sunak said halving inflation by the end of 2023 was one of the government’s five key pledges. It said it had met its target in October, but keeping inflation under control is the Bank of England’s remit

Dearbail Jordan
Business reporter

As well as the interest rate decision, the Bank of England will also publish what it calls its Monetary Policy Report, otherwise known as the inflation report.

Unlike interest rates, which are announced eight times a year, the inflation report is released just four times a year - in February, May, August and November.

In it, the Bank sets out its projections on where it thinks inflation is heading.

It also looks at where the UK economy is going – is it growing? Is it shrinking? Is there a danger of recession?

While the language is pretty chewy, it does give a good insight into why the Bank has made a particular decision on interest rates as well as an indication of where it might go next.

Michael Race
BBC Business Reporter

Interest rates are expected to be left unchanged as the Bank of England looks to balance the impact of higher rates on the UK economy.

Sluggish economic growth and sticky wage growth have led to predictions that rates will be held at 5.25%.

Rates had been hiked previously in a bid to slow the pace of price rises and are at the highest level for nearly 16 years.

Ahead of the Monetary Policy Committee’s meeting, investors expected the Bank would carry out four rate cuts only from June.

Michael Race
BBC Business Reporter

High interest rates can affect people in different ways.

Mortgage holders with variable or tracker mortgages, or those who are looking to secure new fixed-rate deals, have higher monthly payments.

First-time home buyers may find they are priced out of the market as lending conditions become tighter.

Charges tend to be higher for some loans and credit cards that don't have fixed interest charges, but people with savings should benefit from higher interest rates and get better returns on their money.

Higher rates could also be good news for those on the cusp of retirement, who might get a better annuity rate.

This determines how much guaranteed income you get, when you swap some or all of your pension pot for a secure income.

That's because providers typically buy government bonds, which will rise in line with higher interest rates.

For the government though, rises in interest rates in recent times means it has to pay more interest on the country's debt.