The Bank of England held interest rates at 5.25 per cent today (February 1) in its first interest rate decision of 2024.

It it the fourth month in a row the central bank has decided to keep rates the same.

The bank said it will keep interest rates high for long enough to get inflation back to the 2 per cent target.

The Monetary Policy Committee voted six to three to maintain the bank rate.

Two members wanted to increase it by 0.25 percentage points, to 5.5 per cent, while the other preferred to reduce it by 0.25 percentage points, to 5 per cent.

The committee said: “We have raised interest rates over the past two years to help slow down price rises (inflation). It’s working. Inflation in the UK has fallen from a peak of 11 per cent in 2022 to 4 per cent in December 2023.

“But inflation is still above our 2 per cent target. High inflation affects everyone, but it particularly hurts those who can least afford it. We need to make sure it comes down further.

“We expect inflation to fall, though with some bumps along the way. It could briefly drop to 2 per cent in the spring, before increasing slightly again.”

Simon Merchant, co-founder and CEO of Flagstone, said the decision did not come as a surprise.

He added: “Stubborn inflation that sits at double that of its target 2 per cent put to bed any unfounded expectations that the MPC might move to cut rates now.

“Banks and building societies across the UK will need more economic data that points towards greater stability before they start to plan for rate reductions.”

Nick Henshaw, head of intermediary distribution at Wesleyan Financial Services, expects rate cuts to come as soon as May or June.

He said: “During 2023, many clients will have increased their cash allocation to take advantage of rising interest rates and will now have become comfortable with the low risk profile and relatively high returns that this strategy has provided.

“Advisers must support these clients to adjust this strategy in order to maintain the same level of returns.

“That means increasing their exposure to other asset classes, including equities. Platforms support advisers to manage balanced portfolios and will be a vital tool for providing this support to clients.”

While John Glencross, CEO of Calculus, said investors should be prepared for a prolonged period of higher interest rates.

He added: “Investors understand an over allotment of cash could be a short-term view. Calculus, as EIS and VCT managers, are investing in small companies which have the potential to grow and exit at high multiples.

“The current market has encouraged experienced investors and fund managers to find attractively priced opportunities as the higher bank rate has moderated valuations.”