Britain's economy is "moving in the right direction" for the Bank of England to start cutting interest rates, Governor Andrew Bailey said as two of his colleagues dropped their vote a rate hike.

The BoE's interest rate-setters voted 8-1 to keep borrowing costs at their 16-year high of 5.25% on Thursday as the two officials who had previously called for higher rates changed their stance.

Most economists polled by Reuters had expected one member of the Monetary Policy Committee to continue voting for an increase in Bank Rate.

But both Jonathan Haskel and Catherine Mann joined the majority in favour of no change. Swati Dhingra again cast the lone vote to cut Bank Rate to 5.0%.

Governor Andrew Bailey said there had been "further encouraging signs that inflation is coming down" but he also said the BoE needed more certainty that price pressures in the economy were fully under control.

The BoE decision follows the U.S. Federal Reserve's announcement on Wednesday that it remained on track for three interest rate cuts this year which sparked a global rally in stock markets.

The European Central Bank has tried to cool talk about a run of rate cuts for the euro zone that has gathered steam as investors increasingly consider the fight against global inflation to have been won.

Source : Reuters