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STORY: The Bank of England took another step towards lowering interest rates on Thursday (May 9).

A second official supported a cut and Governor Andrew Bailey said more could be on the way than investors expect.

"The big global shocks that caused inflation to rise have faded. And monetary policy is working to bring inflation back towards the 2% target. Inflation has now fallen to just above 3% and we expect it to be close to the target in the coming months, and that's encouraging, but we are not yet at a point where we can cut bank rates."

The central bank said its Monetary Policy Committee voted 7-2 to keep rates at a 16-year high of 5.25%.

Two members voted for a cut to 5%, but the bank has now kept rates on hold at six meetings in a row.

It said it would watch the next rounds of economic data closely.

From late 2021, and over a near two-year period, the Bank of England - like other central banks - pushed up borrowing costs.

It aimed to tackle a surge in inflation which peaked at 11.1% a year and a half ago.

Since then, headline inflation has fallen back.

The Bank expects it slowed to around its 2% target in April, largely because of falling energy prices.

But policymakers have been wary because of strong wage growth and services price inflation, though Bailey said the news on inflation had been encouraging.

Financial markets have fully priced in a first quarter-point cut by August.

They also see another in November or December taking the rate to 4.75%, followed by more cuts next year.

Bailey said a change in the Bank Rate in June is neither ruled out nor a certainty.

The next policy decision comes on June 20.