Policymakers at the Bank of England are anticipated to maintain the interest rate at 4% during their upcoming meeting on Thursday. This rate was reduced from 4.25% at the last Monetary Policy Committee (MPC) meeting in August, marking its lowest point in over two years. Many analysts suggest that no further cuts will occur this year.
The Bank of England’s decision will be revealed at 12:00 BST, following data indicating that inflation is nearly double the target level due to rising food prices. As of August, inflation stabilized at 3.8%, significantly above the 2% target, complicating the Bank’s capacity to control inflation with changes to interest rates. Higher borrowing costs are typically intended to reduce consumer spending and slow inflation; however, such measures might also negatively impact economic growth.
In the previous August meeting, the MPC’s decision to lower the Bank rate involved an unprecedented second vote among its nine members. The governor of the Bank, Andrew Bailey, described this decision as “finely balanced.” Analysts expect a clearer outcome in the upcoming vote, with no changes likely, primarily due to inflation concerns. While forecasters believe inflation rates may begin to decline soon, this leaves open the possibility of future interest rate reductions.
The Bank’s rate significantly influences mortgage rates, as lenders adjust their rates based on the Bank’s policy. Some slight declines in mortgage rates have occurred since the August MPC meeting, but uncertainty remains regarding further shifts. Analysts from Moneyfacts highlighted a trend of decreasing returns for savers since the Bank rate’s reductions, prompting calls for action among those with variable rate accounts.
On a broader scale, the UK government aims for further interest rate reductions to stimulate economic growth, though officials must carefully evaluate persistent inflation risks. Comparatively, inflation is reportedly rising slower in nations such as the US, Germany, and France. The MPC’s Thursday decision follows a recent interest rate cut by the US Federal Reserve, which adjusted rates to a range of 4% to 4.25%.
Source: https://www.bbc.com/news/articles/cge2q7wvyz3o?at_medium=RSS&at_campaign=rss