The Bank of England has held the base rate at 4.25% as widely expected. 

The rate-setting Monetary Policy Committee voted in a 6 to 3 split in favour of holding the rate, which affects a wide range of consumer loan agreements from credit card to mortgage payments.

Three members preferred to reduce the bank rate by 0.25 percentage points to 4%.

The bank rate was cut to 4.25% from 4.5% in May in a 5 to 4 split in favour of reducing the rate.

In the MPC’s summary, it states: “There remain two-sided risks to inflation. Given the outlook, and continued disinflation, a gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate.”

Yesterday, the Office for National Statistics announced that UK inflation held steady at 3.4% in the 12 months to May.

Last week, most economists predicted the bank would pause before any further reductions.

Speaking ahead of today’s decision, Oxford Economics economist Edward Allenby said: “Recent data supports the case for further easing and should reduce the MPC’s worries about inflation stickiness.

“But we don’t think the data has been weak enough to prompt the committee to up the pace of cuts from the tempo seen since last August.”

Allenby suggested the MPC will be watching pay and jobs data closely for the next couple of months.

They will be looking to see how the labour market has responded to April’s rises in employers’ national insurance contributions and the national living wage.

He expects two further 25bps cuts this year in August and November.

Mortgage market reaction to the base rate decision to follow…