Bank holds rate but says it's 'optimistic' things moving in right direction

This afternoon we've seen the Bank of England announce that interest rates will remain at 5.25% - it marks the sixth time in a row the rates have been held.

Here's a summary of some of the details that have emerged alongside the announcement:

• The governor of the Bank has said he is "optimistic that things are moving in the right direction" but needs to "see more evidence" of falling inflation before cutting the base rate
• Andrew Bailey has said he is expecting inflation to fall "close" to the target 2% within the next couple of months - it has fallen to 3.2%, but is still above the Bank's target of 2%
• Inflation figures will inform any future interest rate cut - Bailey did not give any definite date for that today
• We also learnt that activity within the housing market is "beginning to pick up" despite prices having been "broadly flat" over the past year
• Meanwhile, Bailey reported that the "big global shocks" that prompted rises in inflation have "faded"
• The Bank also anticipated unemployment to rise across the coming year but by less that previously thought

As we've been reporting, an interest rate tells you how much it costs to borrow money, or the reward for saving it.

The Bank of England's base rate, currently 5.25%, is what it charges other lenders to borrow money.

This influences what other banks charge their customers for loans such as mortgages, and the interest they pay on savings.

The Bank of England moves rates up and down in order to control UK inflation - the increase in the price of something over time.

Read more here.

Dr Karen Bonner, Principal Economist at Ulster University, say she expects the economy to bounce back next year.

High interest rates mean it is still more expensive for businesses to borrow and invest as high interest rates take spending power out of the economy, which in turn reduces demand, meaning consumers have less money to spend on non-essential goods and services like hospitality, entertainment and retail, Bonner explains.

She says this paints a "subdued picture" for consumers and explains how, despite inflation still falling, the absence of pay rises in line with inflation means price increases are more noticeable and felt harder.

"It is economics but it does have a real impact on people's livelihoods," she says.

The press conference has just ended here at the Bank of England.

There were no real surprise comments from the governor and his colleagues - but there’s still lots to unpack from the Bank’s Monetary Policy Report.

Bailey was asked several times, in several different ways, whether a June interest rate cut was on the cards or not, but refused to be drawn either way.

It seems an August or September cut might be more likely, given the Bank is clear it wants to see the hard inflation figures before it makes a decision.

Savers will be breathing a sigh of relief that rates have been held, according to one expert.

Anna Bowes, from Savings Champion, says that the Bank's base rate decision - although expected - will mean savings rates stay higher for longer.

Much is made of the impact of interest rates on homeowners with a mortgage, but a relatively high base rate has been good for savers. In reality, many people are savers and borrowers - so their individual circumstances dictate the effect rates have on their finances.

But Bowes says that plenty of savings accounts are paying more than the rate of inflation - so savings pots are growing in real terms. As a result, now is a good time to review where savings are held to make the most of these returns, she says.

The Bank of England will not necessarily wait for the US Federal Reserve to make a move on interest rates before it decides to cut rates in the UK, Andrew Bailey says.

"There is no law that the Fed has to go first. Moreover, we have a remit and a target that is related to domestic inflation," he says.

The Bank will always "take the rest of the world into consideration", but only in regard to how it affects UK inflation.

"But there's no law which says we can only move after the Fed moves. That is not something that ever gets discussed" by Bank policymakers, Bailey adds.

Bailey is asked about whether calls from politicians to cut interest rates is helpful or a hindrance to policymakers.

He responds by saying the Bank is an independent institution which has a very clear remit – to set interest rates.

“Let me be clear… we never discuss politics,” he adds.

The Bank of England was granted independence in 1997.

Returning to the Bank's news conference, Governor Andrew Bailey says the pace of future cuts to rates may need to be faster than currently priced in by financial markets to try to ensure inflation does not fall below the Bank's 2% target.

"It's likely that we will need to cut bank rates over the coming quarters and make monetary policy somewhat less restrictive over the forecast period - possibly more so than currently priced into market rates," he told reporters.

"This will be consistent with ensuring that inflation does not fall noticeably below target at the end point of the forecast."

As we mentioned earlier, the Bank's interest rate also affects charges for loans and credit cards.

Here are some tips if you're struggling with debt:

• Talk to someone. You are not alone and there is help available. A trained debt adviser can talk you through the options
• Take control. Citizens Advice suggests you work out how much you owe, who to, which debts are the most urgent and how much you need to pay each month
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• Tackling It Together: More tips to help you manage debt

More now from Bank of England Andrew Bailey who has denied that a rate cut in June is "a fait accompli" - or, in another words, something that will certainly happen.

He tells the news conference that upcoming data releases will be considered, but even if the data lines up with forecasts "we will then need to take a broader judgement - does that mean that those risks to inflation persistence are receding and how do we put that into the context of the view we have taken today".

"June is not a fait accompli - each meeting is a new decision. We are genuinely evidence-based but we have to put that evidence into context."

Many economists have been predicting that the Bank will cut rates in the summer.

Paul Dales, chief UK economist at Capital Economics, said the Bank had given "the impression it’s getting closer to cutting rates".

He said that inflation and wage increases easing off "may be enough to prompt it to cut rates at the next meeting in June, if not at the following meeting in August".

Bailey says the Bank expects unemployment to rise over the next year but less than previously thought, adding that real incomes are growing. “That is good news,” he says.

He adds that any potential interest rate cut as early as June – the next meeting by policymakers – will depend on what happens to inflation.

The governor also points out that forecasts are based on how the Bank expects the world to pan out, which can change.

Bank of England Governor Andrew Bailey starts off his news conference by saying the “big global shocks” that caused inflation to rise have “faded”.

But he says “we are not getting to the point where we can cut [the] bank rate”.

He says he expects falling energy prices to show that inflation fell further in April, but warns the Bank will look at the future releases on price rises - there are two before June – “to be sure inflation will fall all the way back to 2% target and stay there”.

We've just had the news that interest rates are remaining unchanged at 5.25% - a 16-year high.

Here's a reminder of how high interest rates affect us.

Mortgage holders with variable or tracker mortgages, or 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.

People with savings should benefit from higher interest rates and get better returns on their money, but banks are not always quick to pass this onto their customers.

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 had to pay more interest on the country's debt.

Reading a little more into the Bank of England’s latest report, policymakers say that activity in the housing market is “beginning to pick up”.

Households have been hit by big rises in mortgage rates, which has had an impact on what people can afford if they want to move home or buy a place for the first time.

The Bank said official figures suggest house prices have been “broadly flat” over the past year, but that “timelier indicators” point to “some pick-up in the months ahead”.

Some reaction now to the Bank's decision.

Business lobby group the Institute of Directors says it is "disappointed" by the Bank's decision to hold rates, saying that two thirds of business leaders it surveyed wanted a cut.

"The UK economy remains fragile... [and] inflation is forecast to come down sharply in the coming months," says Roger Barker, its director of policy.

“In our view, these conditions would have justified an early interest rate cut."

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Now that we've had the interest rate decision, I’m heading over to the Bank's news conference where we'll hear from decision-makers in the next 10 minutes at 12:30 BST.

Alongside its rate decision, the Bank issued its forecast for inflation and the UK economy - an area which will be a key battleground for the election.

It’s 87 pages long and very detailed, so we are still working our way through it but, in short, the Bank expects inflation to fall to its 2% target in the coming months and for the UK economy to grow slightly more than expected.

We will find out for sure on whether the UK is officially out of economic recession on Friday, when the Office for National Statistics releases its latest estimate.

The UK fell into economic recession at the end of last year when the economy shrank for two consecutive three-month periods, but policymakers believe the downturn might already be over and official figures released on Friday are expected to confirm so.

The Bank said it expected the economy to perform slightly better this year, partly due to the size of the population increasing and some measures in the government's budget, such as the cut to National Insurance.

It forecast growth of 0.4% for the first three months of 2024 - up from 0.1% previously predicted, and growth of 0.2% from April to June.

"Consumer confidence has been on an upward trend during most of the past year," the Bank said, but added that business investment remained "subdued" due to lower demand and "uncertainty".

The health of the UK economy has been in the spotlight with a general election set to be called in the coming months, and economic policies are likely to be a key battleground in the quest for votes.

The governor of the Bank of England says it needs to "see more evidence" that price rises have slowed further before cutting interest rates.

Andrew Bailey said he was "optimistic that things are moving in the right direction" as rates were held at a 16-year high of 5.25% for the sixth time in a row.

Bailey says the Bank expects inflation, which measures the rate prices rise at, will fall "close" to its 2% target in the next couple of months.

It paves the way for a first interest cut to be made in the summer, possibly as early as June if inflation falls as predicted.

Bailey said there had been "encouraging news" on inflation, which official figures last month showed had fallen further to 3.2%.

"We need to see more evidence that inflation will stay low before we can cut interest rates," he said.