The Monetary Policy Committee voted 7-2 to keep Bank Rate on hold at its June meeting, although two members backed a quarter-point increase to 4%.

While inflation has eased to 2.8%, the Bank expects it to rise again later this year as higher energy costs continue to filter through the economy. Global energy prices have fallen since the Bank’s last meeting but remain above pre-conflict levels and continue to fluctuate amid ongoing uncertainty in the Middle East.

The Bank said a loosening labour market and signs of a slowing economy could help contain inflation, while higher borrowing costs for households and businesses should continue to dampen price pressures over time.

Officials stressed they would continue to monitor developments closely and stand ready to act if needed to ensure inflation returns sustainably to the Bank’s 2% target.

Kevin Brown, savings expert at financial mutual Scottish Friendly, commented:  “With tensions seemingly easing in the Middle East – and inflation remaining at 2.8 per cent for May – the backdrop to today’s Monetary Policy Committee meeting was not as fraught as may have been feared.

“Policymakers have now been handed evidence that inflation is not currently accelerating despite the Middle East energy shock. The picture is still far from rosy, but households can take some relief that the Bank of England has not piled a rate hike onto an already complicated picture.

“July’s higher energy bills have yet to feed through to households, while transport inflation has already jumped sharply on the back of fuel costs. Inflation therefore may yet climb before it falls.

“For households, that means the cost-of-living squeeze isn’t over, even if today’s decision avoids tightening the screw further. Reviewing savings rates, building a financial buffer where possible and considering whether longer-term money could work harder through investing remain sensible steps that individuals may want to consider in the current environment.”

Luke Bartholomew, deputy chief economist, at Aberdeen, said:  “The Bank of England was widely expected to keep rates on hold today, so no surprises in the decision. The two votes for a hike show there are some policymakers still concerned about underlying inflation pressures. But with the recent fall in energy prices and the softer inflation data yesterday, events are evolving in line with, or potentially even better, than the Bank’s scenario A from the last meeting, which was consistent with keeping rates on hold this year. And this is likely what is influencing most members of the Monetary Policy Committee. Certainly, inflation has higher to move yet after the upcoming increase in the energy price cap.

“But the conditions don’t seem in place for sustained inflationary pressure. So we think the BoE will be able to avoid the kind of monetary tightening that the European Central Bank has already started to deliver and that the Fed hinted at last night. In fact, if energy prices continue to moderate then the debate could once again turn again to rate cuts, but that might have to wait until next year.”