Bank of England holds interest rates at 5.25% despite good news on inflation... with hopes of relief...

But there are mounting hopes of relief for mortgage-payers in the coming months as pressures on prices reduce.

The Pound dipped slightly on the announcement, as traders hardened their bets on interest rates going down before too long. In its minutes from the meeting, the MPC said inflation had been weaker than expected and is likely to drop below its 2 per cent target in the second quarter of the year.'Headline CPI inflation has continued to fall back relatively sharply in part owing to base effects and external effects from energy and goods prices,' it said.

'The Committee has judged since last autumn that monetary policy needs to be restrictive for an extended period of time until the risk of inflation becoming embedded above the 2 per cent target dissipates.' 'We're not yet at the point where we can cut interest rates, but things are moving in the right direction.'

Not all analysts were impressed with the latest decision. Suren Thiru, Economics Director at ICAEW, said: 'While interest rates staying on hold again was expected, the more dovish vote split and meeting minutes suggest that rate setters are opening the door for rate cuts later this year.

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