Interest rates LIVE: Bank of England set to make key decision at 12pm | Personal Finance | Finance
The Monetary Policy Committee (MPC) will meet today to determine whether the Bank of England Base Rate will change. Economists widely predict the MPC will hold interest rates at 3.75% amid ongoing volatility in the Middle East.
The base rate significantly impacts the cost of mortgages and loans, and influences the interest rates banks offer on savings accounts. It peaked at 5.25% in late 2023, but policymakers have since reduced it, as inflation has dropped to more manageable levels. The UK’s Consumer Price Index (CPI) inflation rate is currently rising at a pace of 2.6%, which is far lower than the 11% highs seen during 2022’s energy crisis, but still higher than the Bank’s 2% target. The Bank of England typically raises interest rates when inflation is high to curb spending and slow price increases.
Economists have said they still expect a majority of the Bank’s rate-setting committee to keep the base interest rate at 3.75% despite attacks in the Middle East and US threats, reigniting some concerns about inflation.
A number of economists, including experts at Oxford Economics and Nomura, have predicted another seven-to-two vote in favour of holding the current rate.
Today’s MPC meeting, which will also see it unveil fresh economic forecasts, comes amid a backdrop of easing inflation in recent months. The Office for National Statistics (ONS) said earlier this week that UK consumer price index inflation eased back to a 15-month low of 2.6% in June, due to a slowdown in food and fuel prices.
However, inflation is now widely expected to swing back higher and further away from the Bank’s 2% inflation target.
Suren Thiru, chief economist at ICAEW, said: “An interest rate hold looks virtually assured, as the recent run of more dovish economic data should give rate-setters sufficient comfort to look through the renewed US-Iran conflict for now.
“While the Monetary Policy Committee’s vote split is likely to remain at 7–2 in favour of holding rates steady, the fresh spike in oil prices will likely strengthen its hawkish stance, keeping a future rate rise on the table.”
Thomas Pugh, chief economist at RSM UK, said he believes oil prices will “largely” steer the path of interest rates for the next year. He said: “If they remain close to 100 dollars per barrel over the summer, a September rate hike would move firmly onto the table, with another in the winter likely.
“However, if there is another peace deal and prices drop back a little, we think a weakening labour market and deteriorating economic outlook will keep the Bank on hold this year, before cutting three times in 2027.”
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