Bank of England forecasts inflation will fall to target of two per cent 18 months early

THE Bank of England yesterday forecast inflation will fall to its target of two per cent 18 months earlier than expected.

The encouraging news led to predictions of four or five interest rate cuts later this year, starting in the summer.

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The Bank said inflation has fallen sharply from a 40-year high in October 2022 and currently stands at four per cent.

In its latest report, it estimated the figure would fall back to two per cent between April and June this year.

It kept interest rates on hold at 5.25 per cent yesterday for the fourth time in a row.

At its meeting, the Bank discussed cutting rates and — for the first time since the pandemic — one member of the committee voted for an immediate drop.

However, two voted for an increase to 5.5 per cent while the remaining six members voted to stay unchanged.

It is the first three-way split on rates since 2008.

Bank governor Andrew Bailey said of its stance: “We need to see more evidence that inflation is set to fall all the way to the two per cent target, and stay there, before we can lower interest rates.”

Chancellor Jeremy Hunt guarded against the optimistic predictions, saying: “We should remember that inflation never falls in a straight line.”

This post first appeared on thesun.co.uk