Interest rates held at 5.25% by Bank of England

The Bank of England has held interest rates at 5.25% but has admitted for the first time that it has discussed cutting borrowing costs.

It said that it expected inflation - which measures the pace of price rises - to fall much more quickly this year.

Bank governor Andrew Bailey had been unequivocal that interest rates would have to stay higher for longer to ease inflation.

But on Thursday, he appeared to soften his language.

The Bank also revealed that, for the first time since the Covid pandemic struck in 2020, a member of the rate-setting committee had voted for a cut.

Inflation has fallen sharply since a 40-year peak in October 2022 to 4% last month.

The Bank is charged with keeping price growth at or close to a target of 2%.

It said in its latest inflation report that the figure will fall back to that target between April and June this year - quicker than it had previously expected.

Mr Bailey said: "We have had good news on inflation over the past few months."

However, he added: "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."

While the governor opened the door to a rate cut, he signalled it may still be some months away.

Minutes from the Bank's meeting this month revealed that there was a three-way split between the members of its rate-setting committee.

Six of the nine members voted to hold rates at 5.25%, two wanted to raise borrowing costs to 5.5% but one - Swati Dhingra - voted to cut rates.