The Bank of England is expected to swerve an interest rates cut today after inflation was shown to have remained above its 2 per cent target.

Most economists think rate-setters on the Monetary Policy Committee will keep interest rates on hold at 5 per cent when they reveal their latest decision at midday.

The MPC cut rates from 5.25 per cent last month, implementing the first reduction since 2020 and delivering good news to squeezed borrowers across the country.

Bank of England Governor Andrew Bailey said it was able to do so because inflationary pressures had ‘eased enough’.

But he stressed that policymakers ‘need to be careful not to cut interest rates too quickly or by too much’.

Latest official data, published yesterday, showed Consumer Prices Index (CPI) inflation remained at 2.2 per cent in August.

This was unchanged from the previous month while core inflation notably nudged up to 3.6 per cent in the 12 months to August, from 3.3 per cent the previous month.

Experts suggested, although being far down from its peak during the cost of living crisis, the inflation data would not be enough to prompt the Bank to start cutting interest rates more quickly.

This is despite the Federal Reserve cutting interest rates in the US by half a percentage point yesterday. 

Matt Swannell, chief economic adviser at the EY Item Club, said the MPC had previously ‘sent a clear message that back-to-back rate cuts were unlikely’ unless subsequent economic data was weaker than expected.

Sanjay Raja, chief UK economist for Deutsche Bank, agreed that yesterday’s UK inflation figures ‘won’t be enough to trigger a surprise rate cut’ today.

‘Instead, the MPC will likely take this as a positive sign that underlying price pressures are easing, and could warrant a further dial down of restrictive policy in November, when it conducts its next forecast update,’ he said.

‘The MPC will also have more information on the fiscal outlook, with the autumn Budget slated for October 30.’

Rob Wood, chief UK economist for Pantheon Macroeconomics, agreed that August’s inflation reading ‘gives the MPC little reason to rush to cut interest rates again’, with the data staying close to its expectations.

He said another month of slowing prices in the services sector, which is watched closely by the Bank, would give rate-setters more ‘comfort’.

The European Central Bank cut interest rates in the Eurozone last week, the second reduction in a row.

The ECB’s rate-setting council lowered the main deposit rate from 3.75 per cent to 3.5 per cent at the meeting.