The Bank of England boss has said “we are on the way” to interest rate cuts after they were left unchanged at 5.25%, their highest for 16 years.
The Bank still needed to see inflation fall further, but last month’s drop to 3.4% was “very encouraging and good news,” governor, Andrew Bailey said.
But he said rate cuts could come before inflation hits its 2% target.
It leaves open the option that the Bank could cut interest rates as early as May, sooner than had been expected.
Mr Bailey sounded far more optimistic on rate cuts than the official statement accompanying the Bank’s decision to leave the cost of borrowing unchanged for the fifth time in a row.
Most economists had predicted interest rates would start to drop in the summer, especially after inflation fell to its lowest level in two and a half years in February.
The Bank has kept interest rates high in a bid to slow the pace at which consumer prices have been rising.
But eight of the nine Bank rate setters voted to leave rates unchanged in March, with only one voting in favour of a cut. Thursday marked the first time since September 2021 that no one on the Bank’s committee which decides rates voted for an increase.