UK interest rates expected to be held at 5.25%

Interest rates are expected to be held at 5.25% for the seventh time in a row by the Bank of England on Thursday.

Despite inflation hitting the central bank’s target level for the first time in three years, most economists have predicted rates, currently at a 16-year high, will not be cut.

They believe the Bank will wait to see if inflation stays at 2% in the coming months, with a first rate cut in the autumn now looking more likely than the summer.

The Bank’s decision comes in the run up to the general election, with policies for the future of the UK economy a key battleground for political parties.

After data revealed inflation fell to 2% in the year to May, the Conservatives said it proved their “difficult decisions” were paying off.

However, Labour responded saying pressures on family finances were “still acute”.

The Bank of England is independent of the government and its main role is to keep inflation, which measures the rate consumer prices rise at, stable at 2%.

In response to high inflation, the Bank in recent years has raised, and then kept interest rates at a high level in an attempt to slow it down and ease the cost of living.

Laura Suter, AJ Bell’s personal finance director, said it would be “very unlikely” that the Bank would cut rates during an election campaign.

“It’s highly likely the Bank will want to wait to see the outcome of the election and the final economic plans before making that first cut,” she added.

“With no meeting in July, that means all eyes are now firmly on the August meeting for our first potential cut to rates.”