The economy is slowing by more than the Bank of England expected only a few months ago and this trend warrants the first pause in a cycle of interest rate rises going back to December 2021. This was the message from the Bank’s monetary policy committee (MPC) on Thursday after its decision to maintain interest rates at 5.25%. An unexpected drop in headline inflation in August was another factor indicating that businesses and consumers were already feeling the strain of higher borrowing costs and cutting back on spending. Inflation had been expected to rise from 6.8% in July to 7% last month, largely due to an increase in oil prices. The Office for National Statistics said a slump in food inflation and a slowing in the previously strong rise in the price of many other goods meant it had fallen to 6.7%. The Bank’s decision was good news for homeowners who were braced for a rise in interest rates to 5.5%. Those with mortgages that must be refinanced over the next year will be relieved to know the central bank has chosen to wait and see before making another move. Rishi Sunak will also be cheered by the outcome, which could put a lid on the pain for consumers, and especially businesses that have spent recent months calling for a halt to the rate hikes to prevent hundreds of thousands of firms going bust. The prime minister already feels he is on course to hit his target of halving inflation this year from its 10.7% average in the last quarter of 2022. An interest rate freeze is a bonus. Fears of another rate rise among business and those seeking a mortgage were supported by financial market expectations that until earlier this week, gave an 80% chance of a quarter-point increase. That moderated after the August inflation figure was published, butthere was still a belief among a small majority that rates would rise. In the minutes of the MPC meeting, the weakness of the property market was cited as one of the main reasons for a pause. Analysis of the labour market also played a role in the decision to hold rates after the Bank’s research department made it known the ONS pay figures may be exaggerating the level of workers’ wage rises when business surveys showed most people were receiving considerably less. Yet the killer statistic may have come from a figure as yet unreleased. The MPC said it was given a sneak preview of the latest survey of private sector activity, the monthly purchasing managers’ index (PMI) for September. These surveys have shown a dramatic weakening of business output and investment in recent months. It is highly probable that the committee has seen a further fall in the September numbers, due out on Friday. There is likely to be speculation that the Bank is now following the US Federal Reserve in a new cycle of increases that use a pause to signal there could be more rises to come. That will depend on the strength of the UK economy. Judging by the latest weak figures for growth, the Bank is done.