It was no surprise the Bank of England decided not to cut interest rates this week, even after data showed annual UK inflation had dropped to a two-and-a-half-year low, but the call will have disappointed many businesses and households.

And the responses to the Bank’s no-change announcement yesterday from some senior experts, while also not surprising, were striking in their frankness.

The Bank’s Monetary Policy Committee has been viewed by a significant number of senior economists for some time now as too hawkish on base rates, which have been hiked from a record low of 0.1% in December 2021 to 5.25%.

And responses yesterday to the latest rates call signal increasing frustration among some who view the Bank as dragging its heels on cutting borrowing costs to the detriment of the economy.

The Office for National Statistics said on Wednesday that annual UK consumer prices index inflation fell from 4% in January to 3.4% last month, the lowest rate since September 2021 but still well above the Bank’s 2% target.

Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said: “Though this interest rate hiking cycle is firmly in the rear-view mirror, the long delay between tightening policy and its impact on the wider economy means that the heavy toll of 14 rate rises has yet to fully crystallise.

“The Bank of England remains overly cautious on the prospect of rate cuts given the startling inflation slowdown and an economy in recession, increasing the risk they prolong our economic struggles by keeping policy too tight for too long.”

Neil Shah, director at investment research and consultancy firm Edison Group, said: “The Bank of England's decision to keep interest rates unchanged at 5.25% was expected but nonetheless disappointing for those hoping for a more proactive stance to stimulate economic growth.”

Nigel Green, chief executive and founder of financial advisory and asset management organisation deVere Group, said: “Enough is enough. The time has come for the BoE to take decisive, bold action and begin cutting rates from 16-year highs at its next meeting.”

The MPC voted eight to one to hold base rates at its latest meeting, which ended on Wednesday.

This represented a sizeable shift in the voting pattern.

External MPC members Jonathan Haskel and Catherine L Mann switched from voting for a quarter-point rise at the committee’s previous meeting ending on January 31 to a no-change stance this week.

Swati Dhingra continued to vote unsuccessfully for a quarter-point cut in base rates.

Mr Thiru observed: “While interest rates staying on hold again was expected, the more dovish vote split and meeting minutes suggest that rate-setters are opening the door for rate cuts later this year… “With inflation on track to drop back to the Bank’s 2% target in April, an interest-rate cut by August looks a distinct possibility.”

Sadly of course, the sky-high inflation seen in recent times in the UK, which has been caused by country-specific factors such as Brexit and household energy bills as well as the global forces the Tories would rather highlight, is permanently baked in.

The February annual UK CPI inflation rate of 3.4% might be down from a 41-year high of 11.1% in October 2022 but it still signals that the cost of living is continuing to rise for households at a lamentably fast rate, even if the pace of increase has slowed.

Sharon Graham, general secretary of trade union Unite, put it well.

She said: “Headline inflation may be slowing but workers won’t be fooled. The cost of living has rocketed in recent years and it continues to rise…Meanwhile it is workers and their families who continue to foot the bill through inflated prices and higher interest rates.”

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Kate Nicholls, chief executive of trade body UKHospitality, said in the wake of Wednesday’s inflation data but ahead of the Bank of England rates announcement: “We must not forget that this still means prices are continuing to rise, albeit more slowly, and hospitality businesses continue to face the brunt of those price rises.

“I hope this drop in inflation will provide a boost in consumer confidence and also prompt further economic good news, particularly through a cut in interest rates.”

Martin Beck, chief economic advisor to the EY ITEM Club think-tank, said of the latest MPC vote: “Assessing the effect of April's large rise in the national living wage on broader pay growth offers another reason for inaction for the time being. But the EY ITEM Club thinks the force of events will compel the MPC to shift its position by early summer and start cutting Bank Rate in June.”

In the US, the Federal Reserve also stood pat on interest rates this week.

It kept the range for the benchmark Fed funds rate at between 5.25% and 5.5%.

The Federal Reserve is also expected to cut rates this year.

The US central bank’s Federal Open Market Committee, in a statement following Wednesday’s decision on rates, said: “Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated.”

It added: “The committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.”

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Richard Carter, head of fixed-interest research at wealth manager Quilter Cheviot, said: “The Fed's hesitance to cut rates stems from the need for more definitive data, particularly regarding inflation trends. While there has been speculation about rate cuts later in the year, with some forecasts suggesting up to three reductions, the central bank has signalled that such moves will be contingent upon clearer signs of inflation moving back towards its target.”

Annual consumer prices inflation in the US rose unexpectedly to 3.2% in February, from 3.1% in January.

James McCann, deputy chief economist at Scottish financial services group abrdn, said: “Markets will probably breathe a sigh of relief that recent upside surprises in inflation have not triggered a more hawkish repose from the Fed…with the central bank clearly feeling comfortable to wait and see how the inflation data evolve, especially with some tentative signs of slowing growth starting to emerge.

“A cut in June continues to look most likely, should inflation cool a little over coming months, and we see further indicators that activity is losing momentum against the backdrop of tight policy settings.”

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Highlighting the potential influence of Fed decisions on other central banks, Mr Carter said: “While the immediate focus remains on domestic monetary policy, the Fed's decisions are being watched closely by global markets. Central banks around the world often take cues from the Fed due to its significant impact on global financial conditions. There's a general anticipation that once the Fed begins to shift towards easing, it could signal other central banks to follow suit, especially those in economies currently facing growth challenges.”

On this side of the Atlantic, worries over the impact of the Bank of England’s monetary policy stance on the struggling UK economy appear to be mounting.

The setting of interest rates in the UK has become quite the controversial topic in recent times, after many years in which it went largely unnoticed. The renewed intense focus on the MPC, and the controversy of course, looks certain to continue as we move through this general election year.