Interest rate cuts 'somewhat closer' than last month ahead of Bank of England announcement

Cuts to Britain's interest rate could be "somewhat closer" than last month, says the Bank of England's chief economist.

Huw Pill highlighted that the economic outlook has "not changed substantially" with some risks still at play if the Bank's Monetary Policy Committee reduces rates too early. Currently, interest rates are at a 15-year high of 5.25 per cent and has remained at this level for the past five MPC meetings.

With a recent drop in inflation, speculation has begun to grow around whether the central bank will begin cutting rates once again. Despite this, it appears the rate-setters are moving cautiously with cutting rates.

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In a recent speech in London, Mr Pill said: “The combination of little news and the passage of time have brought a bank rate cut somewhat closer.

“But the same lack of news gives me no reason to depart from the baseline that I already established.” He added that the steady drop in inflation means "the outlook for UK monetary policy in the coming quarters has not changed substantially since the beginning of March".

He continued: "“After several years of above target inflation rates and given the threat of persistent inflation dynamics becoming embedded in expectations, in my view there are greater risks associated with easing too early should inflation persist rather than easing too late should inflation abate.

“This assessment further supports my relatively cautious approach to starting to reduce bank rate.”

Consumer Price Index inflation dipper to 3.2 per cent in March and is expected to move closer to the Bank's 2 per cent target rate in April, following another drop in energy prices.