17 July: Bank Of England Meets On 1 August
Inflation in the UK flatlined at the Bank of England’s target of 2.0% in the 12 months to June 2024, strengthening hopes that the Bank will reduce the Bank Rate from 5.25% to 5% when it announces its next decision on 1 August, writes Kevin Pratt.
This would prompt some mortgage lenders to follow suit, bringing relief to borrowers on variable rate deals and those coming to the end of relatively cheap fixed-term deals who need to make new arrangements. Many lenders have already reduced rates in expectation of a cut in the near future.
But the move would also likely lead to a reduction in the rates offered to savers, although the most competitive accounts would continue to pay more than 2.0%, providing a ‘real’ return above the rate of inflation.
The Bank increases interest rates when it wants to reduce economic activity and bring down inflation. The Bank Rate reached a 16-year high of 5.25% in August last year from a historic low of 0.1% in December 2021.
A modest amount on inflation is seen as essential for the economy to grow over the long term.
Some commentators have expressed concern about persistent inflationary pressures in the service sector, where inflation is running at almost 6%, which could lead hawks on the Bank’s Monetary Policy Committee to push for a delay in a cut in the Bank rate until the autumn.
At its meeting today (18 July), the European Central Bank held…
