The Bank of England (BoE) has opted to maintain its base rate at 5.25 per cent, marking the fifth time in a row that the the Monetary Policy Committee (MPC) chose to held interest rates.

Although economic forecasters are still expecting interest rates to fall later this year, the current base rate, which was set last August, will remain at its highest level for nearly 16 years.

At its meeting ending on 20 March, the MPC voted by a majority of eight to one to maintain the base rate, while one member preferred to reduce rate by 0.25 percentage points, to 5 per cent.

Institute of Economic Affairs economics fellow, Julian Jessop, said that the decision was “disappointing but unsurprising”, arguing that there are some “welcome hints that cuts are coming soon.”

"For a start, the two members who had still been voting for another hike both switched to no change. The debate is now about when rates will be cut, not if,” he continued.

"The accompanying statement also suggested that the MPC is becoming more confident that underlying inflation pressures are fading.

"The big picture is still that monetary policy is too tight and the Bank has been too slow to cut rates. Nonetheless, the shift in tone today is important.”

This expectation was shared by XPS Pensions Group partner, Danny Vassiliades, who said that the “welcome fall in inflation has once again raised market expectations that the Bank’s rates cuts are imminent”.

Pension schemes need to be prepared for this potential shift, as Vassiliades estimated that a 0.25 per cent decrease in interest rates, outside of current market expectations, could increase aggregate UK scheme liabilities by around £40bn.

"We therefore recommend that schemes should ensure they have suitably balanced investment strategies to protect against any adverse, unexpected market movements," he said.

"Any future rate reductions would also be welcome news for debt holders, including the many pension scheme members with mortgages.”

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