Inflation may drop to 2% in months – as Bank of England holds interest rate for fourth time in a row
The governor of the Bank of England has told Sky News he expects the next interest rate move to be a cut.
Andrew Bailey was speaking shortly after the Bank forecast that inflation could ease to its 2% target within a few months.
However, it opted to hold borrowing costs at 5.25% for the fourth time in a row at its latest meeting.
One member of the Bank‘s rate-setting Monetary Policy Committee (MPC) voted for a cut in its base-level interest rate for the first time since the pandemic.
Britain’s central bank signalled that it was now edging closer to reducing the rate, as it dropped language about the potential need for further hikes from the minutes of its meeting and did not push back against widespread expectations that it will begin cutting later this year.
Interest rate decision – live updates
That was despite continued caution over the outlook for the pace of price increases.
In response to the question how long interest rates should be at this level, Mr Bailey responded: “The decision, unless the world changes, and of course unfortunately the world does change and particularly at the moment, the next decision is more likely to be when do we cut.”
He added: “We haven’t reached a view on when that will be.”
In a further sign that it is beginning to consider lowering the rate, the nine-member committee was split three ways, with one member, Swati Dhingra, voting for a cut, two members voting for higher rates and the remaining six members favouring a hold.
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Sky News speaks to BoE governor
It is the first time since March 2020 that a member has voted for lower rates, and the first time since March 2008 that the committee was split three ways over whether to raise, lower or hold.
Investors currently anticipate that the Bank will begin cutting rates in the middle of the year, reducing them to just over 3% by 2026.
Read more
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The Bank’s forecasts did little to dissuade them that these cuts are coming, though Mr Bailey said the moment had not yet come.
He pointed to the fact that while the consumer price index measure of annual inflation is set to drop to 2% in April, it will later bounce back, mostly due to energy costs.
He said: “Today we’ve decided to hold interest rates at 5.25%. We have had good news on inflation over the past few months. It has fallen a long way, from 10% a year ago to 4%.
“But we need to see more evidence that inflation is set to fall all the way to the 2% target, and stay there, before we can lower interest rates.”
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The Bank upgraded its forecasts for gross domestic product (GDP) growth in the coming years, projecting annual growth rates of 0.5% by early next year (compared with a previous forecast of zero growth), 0.8% by early 2026 (compared with 0.6%) and 1.5% by early 2027.
However, it said that it expected only zero GDP growth in the final quarter of last year – implying (since the previous quarter was a contraction) that there is a near 50:50 chance of the UK facing a technical recession.
The Bank’s economists reckon that around two-thirds of the impact of higher interest rates has now fed through to the wider economy, but more than two million households are still due to see their mortgages refix to higher rates in the coming months.
The UK-US trade deal has been signed and is “done”, US President Donald Trump has said as he met Sir Keir Starmer at the G7 summit.
The US president told reporters in Canada: “We signed it, and it’s done. It’s a fair deal for both. It’ll produce a lot of jobs, a lot of income.”
Sir Keir said the document “implements” the deal to cut tariffs on cars and aerospace, describing it as a “really important agreement”.
“So this is a very good day for both of our countries – a real sign of strength,” the prime minister added.
Mr Trump added that the UK was “very well protected” against any future tariffs, saying: “You know why? Because I like them”.
However, he did not say whether levies on British steel exports to the US would be set to 0%, saying “we’re gonna let you have that information in a little while”.
Mr Trump also praised Sir Keir as a “great” prime minister, adding: “We’ve been talking about this deal for six years, and he’s done what they haven’t been able to do.”
He added: “We’re very longtime partners and allies and friends and we’ve become friends in a short period of time.
“He’s slightly more liberal than me to put it mildly… but we get along.”
Sir Keir added that “we make it work”.
As the pair exited a mountain lodge in the Canadian Rockies where the summit is being held, Mr Trump held up a physical copy of the trade agreement to show reporters.
Several leaves of paper fell from the binding, and Sir Keir quickly stooped to pick them up, saying: “A very important document.”
Sir Keir Starmer picks up paper from the UK-US trade deal after Donald Trump dropped it at the G7 summit. Pic: Reuters
The US president also appeared to mistakenly refer to a “trade agreement with the European Union” at one point as he stood alongside the British prime minister.
Mr Trump announced his “Liberation Day” tariffs on countries in April. At the time, he announced 10% “reciprocal” rates on all UK exports – as well as separately announced 25% levies on cars and steel.
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In a joint televised phone call in May, Sir Keir and Mr Trump announced the UK and US had agreed on a trade deal – but added the details were being finalised.
Ahead of the G7 summit, the prime minister said he would meet Mr Trump for “one-on-one” talks, and added the agreement “really matters for the vital sectors that are safeguarded under our deal, and we’ve got to implement that”.
Whitehall officials tried to convince Michael Gove to go to court to cover up the grooming scandal in 2011, Sky News can reveal.
Dominic Cummings, who was working for Lord Gove at the time, has told Sky News that officials in the Department for Education (DfE) wanted to help efforts by Rotherham Council to stop a national newspaper from exposing the scandal.
In an interview with Sky News, Mr Cummings said that officials wanted a “total cover-up”.
Politics latest: Grooming gangs findings unveiled
The revelation shines a light on the institutional reluctance of some key officials in central government to publicly highlight the grooming gang scandal.
In 2011, Rotherham Council approached the Department for Education asking for help following inquiries by The Times. The paper’s then chief reporter, the late Andrew Norfolk, was asking about sexual abuse and trafficking of children in Rotherham.
The council went to Lord Gove’s Department for Education for help. Officials considered the request and then recommended to Lord Gove’s office that the minister back a judicial review which might, if successful, stop The Times publishing the story.
Lord Gove rejected the request on the advice of Mr Cummings. Sources have independently confirmed Mr Cummings’ account.
Education Secretary Michael Gove in 2011. Pic: PA
Mr Cummings told Sky News: “Officials came to me in the Department of Education and said: ‘There’s this Times journalist who wants to write the story about these gangs. The local authority wants to judicially review it and stop The Times publishing the story’.
“So I went to Michael Gove and said: ‘This council is trying to actually stop this and they’re going to use judicial review. You should tell the council that far from siding with the council to stop The Times you will write to the judge and hand over a whole bunch of documents and actually blow up the council’s JR (judicial review).’
“Some officials wanted a total cover-up and were on the side of the council…
“They wanted to help the local council do the cover-up and stop The Times’ reporting, but other officials, including in the DfE private office, said this is completely outrageous and we should blow it up. Gove did, the judicial review got blown up, Norfolk stories ran.”
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Grooming gangs victim speaks out
The judicial review wanted by officials would have asked a judge to decide about the lawfulness of The Times’ publication plans and the consequences that would flow from this information entering the public domain.
A second source told Sky News that the advice from officials was to side with Rotherham Council and its attempts to stop publication of details it did not want in the public domain.
One of the motivations cited for stopping publication would be to prevent the identities of abused children entering the public domain.
There was also a fear that publication could set back the existing attempts to halt the scandal, although incidents of abuse continued for many years after these cases.
Sources suggested that there is also a natural risk aversion amongst officials to publicity of this sort.
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Mr Cummings, who ran the Vote Leave Brexit campaign and was Boris Johnson’s right-hand man in Downing Street, has long pushed for a national inquiry into grooming gangs to expose failures at the heart of government.
He said the inquiry, announced today, “will be a total s**tshow for Whitehall because it will reveal how much Whitehall worked to try and cover up the whole thing.”
He also described Mr Johnson, with whom he has a long-standing animus, as a “moron’ for saying that money spent on inquiries into historic child sexual abuse had been “spaffed up the wall”.
Asked by Sky News political correspondent Liz Bates why he had not pushed for a public inquiry himself when he worked in Number 10 in 2019-20, Mr Cummings said Brexit and then COVID had taken precedence.
“There are a million things that I wanted to do but in 2019 we were dealing with the constitutional crisis,” he said.
The Department for Education and Rotherham Council have been approached for comment.
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