A cut to the Bank of England’s (BoE) base rate is set to wait another month, after inflation remained at 2% for a second consecutive period, Quilter has stated.

The BoE’s base rate has stayed at 5.25% for seven consecutive periods in June, the highest level for 16 years.

The base rate was raised to tackle inflation, which hit 11.1% in September 2022. As inflation began to fall, analysts expected that the BoE would cut the rate.

However, despite drops in inflation towards the central bank's 2% target, the base rate has remained at 5.25%.

Following the latest UK labour market statistics, Quilter has said that "stubborn levels of core inflation" could lead to an even longer wait for the BoE to cut the base rate, with UK wage growth outpacing inflation.

Therefore, the wealth management firm has said that the central bank will most likely look to see inflation fall further to make the decision to drop the base rate.

Investment strategist at Quilter Investors, Lindsay James, said: "Just yesterday, new data pointed to stubborn levels of core inflation, driven in part by persistently high wage growth in an economy short of workers. This is a key reason as to why even with headline inflation standing at the target of 2%, the BoE is yet to cut interest rates. Recent comments from the Prime Minister have emphasised that wage restraint is needed and will be shown across the public sector.

"Despite the difficult questions this will pose the BoE, strong wage inflation has undoubtedly supported a pick-up in retail spending. Recent month on month GDP growth of 0.4% was linked not only to this, but also to improving consumer confidence and the anticipation of coming rate cuts and improved political stability.

"Looking ahead to 1 August, it seems marginally less likely that the BoE’s first rate cut will materialise after inflation failed to cool any further, so September may be a more reasonable expectation for an initial easing of monetary policy. Nonetheless, inflation is still at target and the labour market is showing some signs of cooling, so we are likely to see more members of the monetary policy committee voting for a cut in the August meeting."

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