Bank of England Signals Rate Cuts as Inflation Eases

After a long stretch of high inflation, the Bank of England finally has its 2 percent inflation target firmly within its sights.

The central bank said on Thursday that it expected inflation to reach its target in two years, and then go even lower, a forecast that comes as policymakers inch toward cutting interest rates.

The majority of the bank’s nine-person rate-setting committee voted this week to hold rates at 5.25 percent, the highest since early 2008 and where they have been for nine months. But two members voted to cut rates, compared with just one at the previous meeting in March. And Andrew Bailey, the bank’s governor, added that, although it was too soon to cut interest rates this week, the slowdown in inflation had been “encouraging.”

Inflation has been in line with expectations recently, which is “an indication that we are now getting back to more normal times — at least compared to the highly unusual period we have been living through with a global pandemic and a major war in Europe,” Mr. Bailey said at a news conference.

Before they cut rates, policymakers are waiting for more data to determine if they are “sufficiently confident” that inflation is on track.

By the bank’s next meeting in June, policymakers will have much more economic information, including two months of inflation and labor market reports.