Andrew Bailey, Governor of the Bank of England, explained that they require assurance that inflation will consistently approach and remain at the 2% target.

He said: “We have had some good news over the past few months. Inflation has fallen a long way, from 10% a year ago to 4% now. Things are moving in the right direction. Today, we have held Bank Rate at 5.25%.

“Yes, we have had good news. But we have to be more confident that inflation will fall all the way back to the 2% target – and stay there. We are not yet at a point where we can lower interest rates.

“The level of Bank Rate remains appropriate. Any decision to change Bank Rate will depend on how the evidence evolves.

Throughout 2022 and 2023, the central bank took assertive measures to increase interest rates, aiming to curb the rapid pace of price increases. The latest rate adjustment occurred in August 2023. Consumer price inflation in the UK saw a modest rise to 4% in December, up from 3.9% the previous month. Despite this increase, the current rate remains considerably below the levels exceeding 10% observed a year earlier.

Kevin Brown, savings specialist at Scottish Friendly, commented: “Holding the base rate at 5.25% is a signal that the Monetary Policy Committee won’t be deviating from its path of fiscal discipline just yet. Clearly the MPC believe it’s too early to turn the heat down on inflation especially as the wider economy isn’t quite in recessionary territory.

“It remains a delicate balancing act though. Many investment market devotees believe a cut can’t be far off and that sentiment will be encouraging for mortgage holders. But for savers and retail investors it does start to beg the question what is the best home for their money as we move deeper into 2024?

“The wider economic picture remains uncertain and rates on cash savings accounts remain high relative to recent years. However, if the base rate begins to tick down further there may be more people looking towards investment markets for the greatest potential to beat inflation.

“As always careful planning is required from families to balance short-term, mid-term and long-term priorities. But if people can adopt a longer time horizon for their cash, then now might be the time to seriously consider committing to investing again as part of a diversified approach.”