There was little change in appetite for a rate cut with seven members of the monetary policy committee (MPC) voting for the status quo. Two members voted for a reduction to 5% but they were roundly outnumbered.

Despite a concern that the Bank will keep rates high for as long as possible some experts have warned that the governor Andrew Bailey risks ‘cratering the economy’ if they delay a cut until the autumn.

The next interest rate announcement is set for 20 June, when it is possible that the Bank could take action to ease pressure on mortgage holders and businesses as inflation falls, possibly below the Bank’s 2% target.

Inflation fell to 3.2% in March from 3.4% in February, and the Bank predicts it will return to ‘close to the 2% target in the near term, but to increase slightly in the second half of this year, to around 2.5%, owing to the unwinding of energy-related base effects’. However, the Bank also points to services consumer price inflation at 6% as one of the reasons to continue to maintain high interest rates.

Longer term the Bank expects inflation to fall below target to 1.9% in two years’ time, then down to 1.6% by 2027, but this is likely to be achieved much sooner if trends in recent ONS inflation reports are to be believed.

However, it is clearly very nervous about reducing interest rates after it came into for heavy criticism for its failure to take action when inflation first started hiking in 2021.

‘Monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term in line with the MPC’s remit,’ the Bank stated. ‘The Committee has judged since last autumn that monetary policy needs to be restrictive for an extended period of time until the risk of inflation becoming embedded above the 2% target dissipates.’

The two members voting in favour of an interest rate cut argued that ‘the outlook for demand remained subdued, with vacancies continuing to fall and nominal pay growth easing, the risks to inflation returning sustainably to the target in the medium term were to the downside’.

However, the Bank said there continued to be ‘upside risks to the near-term inflation outlook from geopolitical factors’, although it admitted that these have had a limited impact on oil prices.

Nicholas Hyett, investment manager at Wealth Club, said: ‘The Bank of England continues to diagnose persistent inflation as the major danger facing the UK economy. However, it’s an increasingly delicate balancing act, and there’s a real risk the economic cure might end up being worse than the disease.  

‘To be fair the picture is murky. The result is a natural inclination to sit on the fence a little longer, especially since cutting too early risks sinking sterling and kick starting another bout of inflation. Leave interest rate cuts too late though, and the Bank risks accidently cratering the economy in its eagerness to get inflation under control. The MPC’s two dissenters clearly think that risk is growing.’

The high interest rates are putting pressure on businesses in debt, while the government is also struggling to manage a huge interest bill on the Covid accumulated debt mountain.

Adam Zoucha, MD of FloQast, said: ‘This prolongment of higher interest rates for longer will require diligent business planning. With the cost of borrowing held at elevated levels, organisations will need to tightly manage the heavier drag on their balance sheets. 

‘Many will need to balance the higher costs of capital, with softer demand and higher wages. Something that will likely hamper growth and make organisations more cautious about investment opportunities.’