The Bank of England’s rate-setting body is likely to keep interest rates on hold at 5.25% for the fifth time in a row when it meets on Thursday, according to market consensus. 

The Monetary Policy Committee held the rate at its last meeting in February as it battles to control inflation at 4%, which is above its 2% target.   

Members voted 6-2-1 in favour of holding the rate. Two members preferred to increase the rate by 0.25 percentage points, to 5.5%, while one member, Swati Dhingra, preferred to cut it by 0.25 percentage points, to 5%.    

The body said in its February minutes: “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.”    

Since then, monthly gross domestic product rose 0.2% in January, driven by an expansion in the services sector. 

The rise followed two consecutive quarters of economic contraction in the second half of last year. 

Also, regular wage growth dropped to 6.1% in the three months to January from 6.2% in the final quarter of last year, their slowest pace since October 2022. 

Meanwhile, the unemployment rate rose to 3.9% from 3.8%, reversing a dip in the final quarter of 2023 when it touched an 11-month low, although the National Office for Statistics is still overhauling the reliability of this survey.   

But despite monthly growth in January, the economy remains fragile. Output was down 0.3% compared to a year ago, according to the ONS, reflecting the impact of high interest rates and the cost-of-living crisis. 

Deutsche Bank chief UK economist Sanjay Raja says: “Given weaker growth, weaker inflation, and weaker pay data, we think an 8-1 vote tally now looks more likely — with external MPC member Dhingra voting for a rate cut. 

“For now, we stick to our May call for the first rate cut. But our conviction levels have fallen, especially with little signalling from the MPC on when rate cuts could begin.” 

However, Deutsche Bank is an outlier in this respect, with most in the market pointing to the summer as the most likely time the committee will sanction its first rate cut. 

AJ Bell head of investment analysis Laith Khalaf adds: “The Bank of England will be minded to keep interest rates on hold when it meets on Thursday and there’s been no significant economic data which would prompt them to take action at this juncture.  

“If anything, the National Insurance cut announced in the [Spring] Budget will probably raise some inflationary concerns.”