The Bank of England has opened the door to cutting interest rates in August in what would be the first drop in borrowing costs for more than four years.
On Thursday, the Bank voted to keep interest rates at a 16-year high of 5.25% in a close-run decision.
Earlier this week, figures revealed that inflation – which measures the pace of price rises – had slowed to 2% in May, which is in line with the Bank of England’s target. However, prices of some items continued to rise faster than expected.
But the minutes from the Bank’s rate-setting committee signalled a significant change in tone, indicating a majority could vote for a cut when they meet again on 1 August.
They say they will look at whether areas of concern are “receding”.
“On that basis, the committee will keep under review for how long [the] bank rate should be maintained at its current level," the minutes said.
While not a done deal, this language is a clear signal to the markets and the public that after the Bank completes its new forecasts for the economy, a rate cut is now the most likely outcome at its next meeting.
However, Conservative MPs accused officials on the Monetary Policy Committee (MPC) of being unfairly and unduly swayed by the upcoming election.
Sir Jacob Rees-Mogg, a former business secretary, said: “It is a political decision by the Bank of England. Inflation is now on target and rates need to be cut.
“That we are in an election period ought to make no difference but the Bank has made a decision based on short-term politics rather than economics.”
The minutes of the MPC’s latest meeting said the election “was not relevant” to the decision to hold interest rates unchanged.