Bank optimistic 'things moving in right direction'

The governor of the Bank of England has said it needs to "see more evidence" that price rises have slowed further before cutting interest rates.

Andrew Bailey said he was "optimistic that things are moving in the right direction" as rates were held at 5.25%.

He said the Bank expected inflation, which measures the rate prices rise at, would fall "close" to its 2% target in the next couple of months.

It paves the way for a first interest cut to be made in the summer.

A cut could come as early as June if inflation falls as predicted.

The decision to keep rates on hold on Thursday was expected by economists and most are forecasting the first cut to interest rates will take place in the coming months.

The Bank's base rate dictates the rates set by High Street banks and money lenders. The higher level in recent times has meant people are paying more to borrow money for things such as mortgages and loans, but savers have also received better returns.

Mr Bailey said there had been "encouraging news" on inflation, which official figures last month showed had fallen further to 3.2%.

"We need to see more evidence that inflation will stay low before we can cut interest rates," he said.

The Bank signalled its Monetary Policy Committee was edging further towards making a rate cut, with two of the nine members voting this month in favour of reducing rates to 5%. The remaining seven voted to hold rates.