The Bank of England (BoE) has left the base rate unchanged at 5 per cent following the latest Monetary Policy Committee (MPC) meeting, with governor, Andrew Bailey, hinting at future rate cuts.

The MPC voted to maintain interest rates by a majority of 8-1, with one member voting to reduce the base rate by 0.25 percentage points.

Despite the apparent caution, Bailey said that interest rates were now “gradually on the path down”, with inflation remaining at 2.2 per cent last month.

“Despite the supersized rate cut in the US yesterday and cuts continuing to be enacted in Europe, the BoE has decided to hold rates following its first cut in four years last month,” Quilter Investors investment strategist, Lindsay James.

“However, while today may be a pause, the general consensus is to expect more rate cuts this year and into next as the economic momentum that had built up slows and inflation remains close to target.

“Two more cuts are expected by financial markets, and with time running out in 2024, the next meeting is likely to see the BoE’s next cut delivered.”

However, James described the upcoming Autumn Budget as “the spectre hanging over all this”, with tax changes expected to be included.

Fidelity International associate director for personal investing, Ed Monk, said the 8-1 vote in favour of holding rates was a surprise given the recent economic data had shown growth slowing.

He noted that expectations for where rates will land have been moving lower as the year has progressed, with market prices ahead of the announcement suggesting rates will fall below 4 per cent within 18 months.

“With inflation sticking slightly ahead of target and expected to rise again this year before settling, real returns from cash are likely to be lower than has been the case over the past two years,” he stated.

Monk therefore argued that now was a good time for investors to reassess their balance of cash versus investments.

Meanwhile, Hargreaves Lansdown head of money and markets, Susannah Streeter, said the note of caution from policymakers had “caused concern to creep in” about the pace of future rate cuts.

“The FTSE 100 gave up ground as governor, Andrew Bailey, underlined there was wariness around the table about cutting too fast or by too much,” she continued.

“The recent rise in services inflation will have been a concern, with worries it could be passed on in the form of higher prices to consumers.

“Nevertheless, there is still optimism that although the path may be a bit slower, the recent painful era of high interest rates is still coming to an end.

“There is still an underlying pulse of positivity lifting London-listed stocks, as they have also been buoyed by the decision by the US Federal Reserve to cut rates for the first time in more than four years.”

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