Interest fee minimize hopes scuppered by Election

Hopes of a pre-election rate cut are set to be dashed this week as economists warn that lower borrowing costs later this summer are ‘not a done deal’ either.

The Bank of England is expected to keep interest rates at 5.25 per cent when its Monetary Policy Committee meets on Thursday.

It would be the seventh time in a row that rates have been held at their 16-year high.

Experts say Rishi Sunak’s move to call a surprise General Election has made it easier for the Bank to peg rates. The Bank, which is independent, does not want to be accused of taking sides during an election campaign, they add.

‘The political context would make a pre-election rate cut needlessly complex,’ said Stefan Koopman, economist at investment bank Rabobank.

Complex: Experts say Rishi Sunak’s move to call a surprise General Election has made it easier for the Bank to peg rates

Calls to cut rates have grown as inflation – which peaked at 11 per cent after the invasion of Ukraine – drops towards the Bank’s 2 per cent target.

But the Bank is not yet convinced that inflation is tamed, especially in the services sector where prices rose by 6 per cent in April.

Sanjay Raja, chief economist at Deutsche Bank, said the Bank will want proof of inflation nearing ‘target-consistent levels’. He added an August rate cut is not a ‘done deal’.