The Bank of England has decided to keep UK interest rates unchanged, but gave a new sense of optimism that borrowing costs could soon be cut if inflation is reined in.
While the central bank voted to hold rates at 5.25%, governor Andrew Bailey said he was “optimistic that things are moving in the right direction”.
Mr Bailey said there had been “encouraging news” on inflation which the Bank expects to come close to its 2% target between April and June.
But he added: “We need to see more evidence that inflation will stay low before we can cut interest rates.”
In a strong signal that the tide is turning among the rate-setters, two members of the Bank’s nine-person Monetary Policy Committee voted for interest rates to be cut by 0.25 percentage points.
The members, Swati Dhingra and Dave Ramsden, felt that Consumer Prices Index (CPI) inflation was already on a firm downward path and there was no need to delay reducing borrowing costs.