Bank of England to make interest rates announcement tomorrow - will they finally come down?

The Bank of England will reveal whether interest rates will finally be slashed in an announcement on Thursday, August 1.

Policymakers at the central bank will decide whether to keep the base rate at 5.25 per cent - where it has remained since August last year - or finally reduce the rate, which would come as welcome news to borrowers.

The 5.25 per cent base rate is the highest rate seen in the UK since 2008. If the Bank of England's Monetary Policy Committee (MPC) decides to cut interest rates, it would be the first time in more than four years.

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Some experts think it could now be slashed by 0.25 per cent to 5 per cent. Opinions appear to be split however, with some believing policymakers will wait longer, despite growing evidence that inflation has been tamed.

New economic data suggested the UK’s cost of living crisis has eased in recent months as inflation falls. Consumer Prices Index (CPI) inflation hit 2 per cent in May and June, which is the central bank’s target level, indicating that price rises have been brought under control.

However economists have stressed that other key factors - such as services inflation and wage rises – have remained a concern for policymakers.

Up until now, economists have been reluctant to call a drop in interest rates, but some are now predicting that a reduction is on its way. Expectations on financial markets show about a 65 per cent chance of the MPC opting to reduce rates.

James Smith, developed market economist for ING, said it will be a "close call" but he expects a majority of policymakers to vote in favour of a 0.25 percentage point rate cut. He said services inflation – which looks only at