9 May: Summer Reduction In Rates Hinges On Inflation News
The Bank of England has, as expected, kept borrowing costs at a 16-year high of 5.25%, the sixth time since August last year it has left its all-important Bank Rate unchanged, writes Andrew Michael.
Today’s announcement by the Bank’s Monetary Policy Committee (MPC), which voted by 7 votes to 2 to maintain the Bank Rate at its present level, echoes last week’s decision by the US Federal Reserve, which also chose to hold borrowing costs.
Both the Bank of England and Fed, along with the European Central Bank, are required by their respective governments to keep inflation at 2% over the medium to long-term.
In a bid to stave off soaring inflation levels during 2022 and much of 2023, the Bank of England raised borrowing costs 14 times in an aggressive bout of rate tightening not seen since the 1980s.
As a result, the UK’s inflation rate has fallen from a high of 11.1% in October 2022 to 3.2% in March 2024. The figure for April will be released on 22 May.
Bank officials will be hoping for a further reduction in the headline figure, potentially paving the way for them to reduce borrowing costs as early as June.
Today’s announcement means that millions of borrowers on variable rate and tracker mortgages and loans should not experience any direct impact on their repayments. Lenders, however, are at liberty to alter variable rate products should they choose to do so.
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