For the first time in over a year, the Bank of England has maintained the current interest rate at 5.25%

The decision to hold the base rate comes after the minimal drop in inflation to 6.7%. The monetary policy committee voted by a majority of 5–4 to maintain bank rate at 5.25%. Four members wanted to increase the interest rate by 0.25%, to 5.5%.

This means that HMRC interest rates will remain at 7.75% until at least November when the Bank meets again.

The Bank also indicated that it expects inflation to return to the 2% target in the medium term, but unlike last month’s report, did not put a timeframe on its earlier estimate of Q2 2025.

‘Monetary policy will need to be sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term,’ the Bank noted. ‘Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.’

CPI inflation is expected to fall significantly further in the near term, reflecting lower annual energy inflation, despite the renewed upward pressure from oil prices, and further declines in food and core goods price inflation, the Bank said. Services price inflation, however, is projected to remain elevated in the near term, with some potential month-to-month volatility.

Nigel Green, chief executive of deVere Group, the financial advisory and asset management firm, said: ‘The central bank policymakers should go further and commit to stopping the hiking agenda, rather than just pausing it.

‘The battle against inflation is gradually being won. Further stifling economic growth by resuming rate rises next time around will lead to yet more decline in investment, entrepreneurial activity, development, innovation – and therefore jobs and a decline in overall economic well-being.

‘As such, this is now the time for the BoE to stop – not pause – interest rate hikes.

‘The time lag for monetary policies is notoriously long. It typically takes about two years for the full effect of rate hikes to filter fully into the economy – and this is where we are.’

The impact of soaring interest rates has had a punitive impact on businesses exposed to high borrowing.

Nils Kuhlwein, partner at Kearney, said: ‘While the effect of rising interest rates on UK plc is well-known, closely watched, and priced into future risks, successive base rate jumps over recent years have turned the screw on these companies.

‘Recent Kearney research into companies which are unable to meet interest obligations through operating profit – known as ‘zombie companies’ – shows that if struggling UK companies were forced to refinance at twice the interest rate they enjoy currently, the share of this ‘walking debt’ amongst UK business would increase by almost 10%.

‘Given that many of these companies currently see rates as low as 2-3% on some debt, this is hardly unreachable.’