The Bank of England is inching closer towards the first interest rate cut since the Covid pandemic, but just not yet. After several months of inflation falling more sharply than anticipated by many economists, the question for the Bank has been when, rather than if, it would begin taking action to lower borrowing costs. Although Threadneedle Street kept interest rates unchanged on Thursday at 5.25% – the highest level since the 2008 financial crisis – its policymakers took steps to set the stage for forthcoming cuts to ease the pressure on households and businesses. Unlike a month ago when two members of the Bank’s nine-strong rate-setting monetary policy committee (MPC) pushed for an increase in borrowing costs, eight members voted for a hold this time around. The ninth member of the panel, Swati Dhingra, again backed a cut of 0.25 percentage points. It was the first time since September 2021 – when the government’s pandemic furlough scheme was ending – that no one on the MPC voted for an increase in interest rates in a clear sign that policymakers are coming round to the view that the battle against inflation is being won. Underscoring the shift in direction, the Bank’s governor, Andrew Bailey, said he believed the central bank was “not yet at the point where we can cut interest rates, but things are moving in the right direction”. His comments will provide some relief for Rishi Sunak, who has struggled to make the case that 2024 is Britain’s “bounce back” year from the economic slump triggered by the pandemic and cost of living crisis. Inflation has fallen by the most in almost half a century, from more than 10% a year ago to 3.4% in February. Most economists expect it will fall back further in the months ahead to dip below the Bank’s 2% target, helped by a widely expected fall in energy bills from April. Surveys of business activity indicate Britain is on the road to recovery from a recession that started at the end of last year. However, households remain under pressure from much higher interest rates and living costs than three years ago, while the labour market is cooling. In previous times such conditions could have warranted rapid action from Threadneedle Street. However, the Bank worries that inflation will return back above its target later this year, amid resilient wage growth and rising prices in the service sector of the economy. For this reason the Bank is most likely to wait for official jobs market and inflation figures to be published in April and May before taking action. Based on the data so far and signals from Thursday’s decision, financial markets expect a first cut in June. This will however mean a tough waiting game for Sunak, who is leading a government in desperate search of good news on the economy before he takes the plunge to call a general election. Britain has had three prime ministers since the Bank last cut interest rates in March 2020. Sunak will be hoping for progress in the economy to allow Threadneedle Street to take action before his time in Downing Street runs out.