The Pound dipped against the US Dollar on Thursday ahead of the policy meeting at the Bank of England.

The central bank is anticipated to keep rates steady but indicates when it plans to reduce the cost of borrowing.

As it stands, money markets are pricing in around a 95% chance the Bank of England will hold the benchmark interest rate at 5.25%, the highest since 2008, according to LSEG data.

However, investors will be keeping a close eye for signals of when the first interest rate in four years may occur as inflation declines, Reuters news agency reports.

Markets now forecast a 56% chance of a rate cut in June, when the European Central Bank has already indicated it will lower borrowing costs, and a 72% chance of a rate cut by the Bank of England in August.

“It’s widely anticipated they’ll leave rates unchanged at 5.25%, where they’ve been since August. So the focus will instead be on the vote split, their new forecasts, and what their forward guidance signals about potential cuts in the future,” according to Jim Reid, Deutsche Bank strategist.

The Pound dipped 0.15% to $1.2479 at the time of writing, away from a three-week high of $1.2709 reached on Friday.

Whilst against the Euro, Sterling fell 0.06%, close to a two-week low against the single currency hit on Wednesday. 

According to the majority of economists surveyed by Reuters, members of the Bank of England’s Monetary Policy Committee will likely vote 8-1 for a second time in a row the keep the bank rate on hold.

Interest rate reductions would be favourable for Prime Minister Rishi Sunak as he prepares for an upcoming election expected this year. Sunak has assured voters that the economy is improving, but he faces challenges in opinion polls against the Labour Party.