Interest rate cuts should still be ‘a long way off’ despite falling inflation, a key Bank of England official has warned.

Jonathan Haskel said the drop to 3.4 per cent was ‘very good news’ but rate-setters are instead focused on ‘the persistent and the underlying inflation’.

‘I think cuts are a long way off,’ he told the Financial Times. The comments will dampen hopes over the timing of a rate cut.

Cautious: Rate-setting committee-member Jonathan Haskel (pictured) said the drop in inflation to 3.4% was ‘very good news’ but ‘not informative about what we really care about’

Cautious: Rate-setting committee-member Jonathan Haskel (pictured) said the drop in inflation to 3.4% was ‘very good news’ but ‘not informative about what we really care about’

Cautious: Rate-setting committee-member Jonathan Haskel (pictured) said the drop in inflation to 3.4% was ‘very good news’ but ‘not informative about what we really care about’

Interest rates have been hiked to 5.25 per cent as the Bank of England battled inflation. 

But hopes of a cut have been raised as inflation falls and Bank Governor Andrew Bailey said ‘things are moving in the right direction’. 

They have also been stoked by the retreat of the two most hawkish rate-setting committee members – Haskel and Catherine Mann.

This week, Mann said markets were ‘pricing in too many cuts’. By last night, bets on a June rate cut had faded and August was seen as more likely.

Figures from the Office for National Statistics yesterday confirmed that the economy shrank for two successive quarters at the end of last year – meeting the technical definition of recession. 

Over the six-month period, the decline was 0.4 per cent.

When will interest rates fall?

Economists are divided on exactly when rates will fall and by how much but most expect a series of cuts this year.

Bank of England governor Andrew Bailey said that he was not against cuts arriving in 2024, in an interview with the FT last week. But other MPC members will need convincing and in the last meeting just one vote for a cut. 

Future falls: Capital Economics is forecasting the the bank rate will be cut to 3% in 2025

Future falls: Capital Economics is forecasting the the bank rate will be cut to 3% in 2025

Future falls: Capital Economics is forecasting the the bank rate will be cut to 3% in 2025

The Bank of England will cut the base rate to around 3 per cent by in 2025, according to the latest forecasts from Capital Economics.

Wider market expectations continue to also all point towards the Bank of England cutting the base rate later in 2024, albeit they have been revised up since the start of the year.

At the start of this year, investors were betting rates could be cut to 3.75 per cent by Christmas.

But it is now thought rates will fall to just 4.5 per cent this year – with the first move expected to come in June.

> Read more: When will interest rates start to fall 

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