The Bank of England says its Monetary Police Committee voted 8-1 in favour of keeping interest rates unchanged at 5.25%.

It added that one member preferred to reduce the rate down to 5%.

The last time it made a decision on interest - at the start of February - it voted by a majority of 6-3, also to hold rates.

The committee that makes that call is comprised of nine members - the governor Andrew Bailey, three deputy governors, the bank's chief economist, and four external members appointed by the Chancellor.

Britain is closer to rate cuts at some point in the summerpublished at 12:04 Greenwich Mean Time 21 March

12:04 GMT 21 March

Faisal Islam
Economics editor

On the high seas, it takes some time to get a tanker to change direction.

And so it is with the Bank of England. Last month we got the first vote for a cut on the nine member panel that decides interest rates in four years. This month there were no votes for a rate rise for the first time for two and a half years. But rates were still on hold.

Britain is incrementally, marginally closer to rate cuts at some point in the summer, but as the Governor Andrew Bailey says “not yet”.

The fact that the UK is officially in recession and inflation is tumbling towards target raises the question as to why they don’t just cut now. The answer is that inflation in the service sector remains above 6%.

The Bank of England’s next meeting is in May, at which it will redo its forecasts for the economy and the inflation. This provides an opportunity to rethink. But by then, it might not be totally clear how much inflation has fallen, and how much Spring wage settlements have calmed.

Interest rates have been held for the fifth time in a row by the Bank of England, remaining at 5.25%.

The widely expected decision means the cost of borrowing stays at its highest level for 16 years.

The Bank has been keeping interest rates high to try to slow sharply rising prices.

But after inflation fell to its lowest level in two and a half years last month, economists expect rates to start falling in June.

Ahead of the Bank's decision, let’s take a quick look at how the interest rate has changed over the years.

Image source, .

Martin Weale, a professor of economics at King's College London, says that even though inflation is coming down, the Bank of England is “still concerned about underlying inflation pressures and they will want to see further progress in those before making a cut” to interest rates

Speaking to BBC Radio 4’s Today programme, Weale says it will be interesting to see who is voting for a cut and who is not.

He doesn’t expect a change in rates, but says “a gradual build up of people voting for a cut is often an indication that one is to come”.

Weale, who was on the Bank of England's Monetary Policy Committee from 2010-2016, believes the Bank is also concerned about wage increases, as it means “more spending money in people’s pockets", creating extra demand.

Right after the inflation figures were released yesterday, we had reaction from Chancellor Jeremy Hunt.

Hunt said that as inflation gets closer to its 2% target, it "opens the door" for the Bank of England to consider bringing down interest rates.

There have been 14 Bank of England interest rate hikes over the last two years and many other countries have seen rises too.

However, the impact differs. In the US and some of Europe, fixed-rate mortgage deals tend to typically run for 25 or 30 years and homeowners may be able to switch deals with minimal penalty.

The French government also effectively caps rates, so a new 30-year mortgage deal may cost 3.5% while in America those rates peaked at over 7%.

So, borrowers in those countries may be more shielded from rate hikes than in the UK, where the majority are on two or five-year fixed rate deals.

• How will the UK economy compare to other countries in 2024?

The Bank of England has been holding interest rates steady after a run of 14 consecutive increases that were intended to curb the soaring pace of general price rises.

Like in the UK, interest rates around the world had been on the increase.

However, in recent months, other central banks - including the US Federal Reserve and the European Central Bank - have also paused their rate rises.

The UK has had one of the highest interest rates in the G7 - the group representing the world's seven largest so-called "advanced" economies.

Image source, .

Kit Vickery
Cost of living producer

Paul Day, from Felixstowe in Suffolk, is retired. He needs to find a new mortgage deal as his five-year fixed rate ends in May.

"I'll have to go for another fixed term to get the mortgage down to what I can afford," he says.

He pays £1,027 a month and his current lender has offered him a two-year fixed mortgage at a 4.8% rate which would increase his cost to £1,088 a month.

“I’ve never read so much about mortgages in my life but I'm really looking at the changes every day and the changes are literally happening by the hour," he says. “I’m going to leave it till the last minute."

He is trying to cut back on other bills to prepare for the rise in his mortgage payments.

"It's not going to be easy but better than some people."

Image source, Getty Images

Currency traders are pricing in slightly higher cuts to UK interest rates this year after lower than expected inflation figures.

Money markets are betting there will be 0.7% of rate cuts this year, up from speculation on 0.67% of cuts.

But investors in companies on the London stock market were cautious ahead of a decision on rates by the US Federal Reserve later on Wednesday, with the FTSE 100 edging down.

Central banks around the world tend to follow the lead of the Fed, which is widely expected to hold rates at 5.25% to 5.5%.

In general companies benefit when money is cheaper to borrow, meaning higher returns for investors.

Image source, PA Media

As we've just reported, new government figures show that the energy price crisis caused the sharpest increase in absolute poverty in the UK in 30 years.

In response, Work and Pensions Secretary Mel Stride says the government's cost of living package, worth an average of £3,800 per household, "prevented 1.3 million people from falling into poverty" in the year 2022 to 2023.

“Our decisive action to more than halve inflation has allowed us to deliver tax cuts worth an average £900 a year – putting more money directly in the pockets of hardworking families," he says.

He adds that the government is bringing in the "biggest ever rise to the National Living Wage", and in April, benefits and pensions will be uprated.

Robert Cuffe
Head of statistics

The energy price crisis caused the sharpest increase in absolute poverty in 30 years in the UK, according to figures published this morning by the Department for Work and Pensions.

In the year after the Russian invasion of Ukraine, prices rose steeply and more families couldn’t afford the standard of living used by the government to describe “absolute” poverty.

The government spent billions to support incomes with the Household Support Fund and cost of living payments but these were not enough to prevent hundreds of thousands of people falling into absolute poverty.

In the year ending March 2022, just over 17% of people were living in families whose incomes was less than 60% of the average seen in 2011.

But in the year after the war started, this figure rose to nearly 18%, the largest seen for 30 years.

That is a rise of 600,000 people, wiping out a third of the fall in absolute poverty seen since the Conservatives came to power in 2010.

When might a rate cut come?published at 10:48 Greenwich Mean Time 21 March

10:48 GMT 21 March

Faisal Islam
Economics editor

Image source, Getty Images

While the Bank of England is not expected to cut rates today, we should get clues as to when a rate cut might come.

Those clues could come in the votes of the nine member committee of economists who decide interest rates. At the last meeting there was one vote for a cut, two for a rise and the rest were to keep rates on hold at 5.25%. If that changes significantly, it shows the committee as a whole is starting to think inflation is coming under control.

The language the Bank uses could also change, as it has done in the past few months. These differences can be quite subtle.

And all of this matters because even if the actual base rate does not change, it could immediately change expectations in financial markets about when cuts might happen, which in turn changes the actual mortgage and savings rates on offer from the Banks.

Yesterday we saw some mortgage rates start to fall after the better inflation figures even on the anticipation that the Bank of England might cut at some time in the future.

This is a case where words do matter, as well as actions.

Michael Race
Business reporter, at the Bank of England

Good morning from the Bank of England in central London.

I’m here with my colleague Charlotte McDonald to bring you the latest decision on interest rates.

Soon we'll be heading down into the depths of the historic building behind us where we - along with other journalists - will be locked in the Bank's basement for an hour.

We'll have no contact with the outside world for the hour we're down in the basement - we're asked to put any mobile devices into a locker to prevent any leaks of the announcement.

We'll be handed a document revealing the Bank's decision and reasons behind it and from then on, have about an hour to digest the news, and package it all together to release to the public at midday.

Come that time we'll be given access to the Bank's wi-fi and you'll get the latest interest rate seconds after.

In other news, government borrowing was higher than expected - at £8.4bn - in February, in part because of higher benefits payments such as cost-of-living support.

Economists had predicted that borrowing would come in at £6bn for the month.

However, the Office for National Statistics (ONS) said the February number was £3.4bn lower than a year earlier, as the growth in tax receipts exceeded growth in spending.

It was also the fourth consecutive month where borrowing was down on the previous year.

• You can read more on this story here

Raphael Sheridan
Cost of living producer

High interest rates directly impact the affordability of major purchases like cars, leading to higher loan repayments. This makes buying a car more costly, potentially forcing individuals to reconsider their options or opt for more budget-friendly alternatives.

Alex Walker, the owner of Alan Davies car sales, has observed a shift in customer behaviour regarding car purchases. Previously, customers would “fancy a swap” in cars, but now they are delaying such decisions until necessary due to financial constraints.

Walker says his customers “can’t believe” how much their insurance prices have increased. Even with the installation of black boxes to monitor driving behaviour, first-time drivers are finding it challenging to afford insurance premiums.

Walker acknowledges the unfortunate reality of this situation but believes that people will need to adapt to these changes in the automotive market.

Image source, Getty Images

The Consumer Prices Index (CPI) inflation rate - which tracks the price of a typical basket of goods - fell from a high of 11.1% in October 2022 to 3.9% in November 2023. It ticked back up to 4% in December and January.

Yesterday it was announced that inflation fell to 3.4% in February, the lowest level for over two years but still quite far from the Bank of England’s 2% target.

Charlotte McDonald
Business reporter

Image source, PA Media

Interest rates move up and down in order to control the UK inflation rate, which has come down sharply in recent months, easing cost-of-living pressures.

The inflation rate now sits at 3.4%.

When interest rates are high, it is more expensive to borrow money but there are better returns on offer for savers. Higher interest rates help to slow down price rises, because it encourages people to spend less, which dampens demand.

It also has an impact on the cost of mortgages too. For example, when interest rates rise or fall, more than 1.4 million people on tracker and standard variable rate (SVR) deals usually see an immediate change in their monthly payments.

Sunak strongly suggests economy is 'bouncing back'published at 10:13 Greenwich Mean Time 21 March

10:13 GMT 21 March

Faisal Islam
Economics editor

Image source, Reuters

The path of rates matters economically, and politically too. These calculations are undoubtedly affecting the thinking on the election timetable.

Yesterday I was invited to Downing Street to speak to the prime minister about the state of the economy in light of yesterday’s sharp drop in inflation. He surprised me with how strongly he suggested the economy was turning around, going as far as saying it was "bouncing back" and replying it was "not just him" who was seeing green shoots of recovery.

It seemed a strong thing to say given that the UK is still officially in recession, albeit a mild one.

Last month the chancellor told me that the turning point would be visible for all to see when the Bank felt confident enough about low inflation, to cut rates. Lower rates also help his budget sums add up, and could provide extra room for manoeuvre to offer pre election giveaways.

The Bank has communicated that despite the fact the headline rate of inflation is falling rapidly, it is still looking at services inflation rising above 6% a year, and has some concerns that wages and prices could remain sticky. It is not going to cut, just because the energy price cap is falling.

Today will give us some clues as to when that turning point will come. Sometime in summer is the current expectation in markets.

Raphael Sheridan
Cost of living producer

"Interest rates have been going up, the cost of living has been going up. I think we just need a bit of a break now."

Following the interest rate increases in 2022, Dharmesh Patadia, a homeowner in Hitchin, has faced a substantial increase on his variable rate mortgage payments.

He’s now paying over three times what he was before the rate rises, an increase of hundreds of pounds.

Patadia says he’s looking to fix his mortgage rate early once rates begin to fall, despite knowing that rates are likely to drop further and he could potentially get a better deal if he waited, saying that the security of set monthly outgoings is the most important thing for him.

"I just want to have comfort and knowledge that I have a fixed cost and it’s done."