The Bank of England's Monetary Policy Committee has voted 6-3 to hold interest rates at 4.5 per cent, but accompanying guidance strongly suggested that a rate cut in September is now the base case for policymakers.

The decision was widely expected, but the dovish shift in language surprised markets. The pound fell 0.3 per cent against the dollar, while gilt yields dropped sharply as traders priced in a 25 basis point cut at the next meeting.

"The balance of risks has shifted," said the Governor in his post-decision press conference. "Inflation is returning to target on a sustainable basis, and we are now confident that the economy can absorb a gradual easing of monetary policy."

Mortgage lenders responded within hours, with several high-street banks reducing fixed-rate mortgage pricing. The average two-year fixed rate fell to 4.1 per cent — its lowest level since early 2023.