The Bank of England has held interest rates at 5.25 per cent in its announcement today (March 21).
It is now the fifth month rates has been held at the same level by the central bank.
The bank's Monetary Policy Committee voted eight to one to maintain the bank rate.
A report from the committee read: "Monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2 per cent target sustainably in the medium term in line with the MPC’s remit.
"The committee has judged since last autumn that monetary policy needs to be restrictive for an extended period of time until the risk of inflation becoming embedded above the 2 per cent target dissipates."
Dean Butler, managing director for retail at Standard Life, said people are anxious about the level of interest they could pay as there are more than a million people on fixed mortgages expected to expire this year.
He said: "It’s easier said than done, but making sure you have a buffer for rising rates when making a big financial decision like taking out a mortgage or loan can help to ease anxiety later on."
Charles Younes, deputy CIO at FE Fundinfo, said though the decision came as no surprise, bond investors are expected to press ahead with pre-formulated predictions.
He added: "As is often the case in the UK, the monetary transmission mechanism is fast-efficient due to the specifics of the housing market, given the timeframes at which people re-mortgage their properties. The BoE needs to take its resilience into consideration before initiating its easing cycle."
Despite a hold this time, Jonny Black, chief commercial and strategy officer at Abrdn Adviser, was confident there would be a cut this year.
He added: "What’s for sure is that the bank won’t act until its confident that the now diminishing fire of inflation won’t be blown back into full flame. Yesterday’s fall in inflation shows things are moving in the right direction.
“Lower rates won’t be uniformly ‘good’ or ‘bad’ for clients. Last week, a BoE survey into UK households’ attitudes around inflation found that although nearly a third of people said it would be better for them if interest rates were to go down, nearly a quarter would benefit more from a further hike.
"To me, this highlights just how much clients are going to value their advisers’ support in navigating whatever lies ahead. Some won’t perceive one or other outcome as in their best interests, and advisers have a role to play in explaining how their strategies are already designed to still deliver for them in the long-run, or what changes they will need to make to keep their goals in sight.”
The Bank of England's decision comes a day after the Office for National Statistics revealed inflation fell to 3.4 per cent in the year to February 2024, a drop from 4 per cent in January.
tara.o'connor@ft.com
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