Interest rates are expected to be held at 5% by the Bank of England on Thursday. The decision at midday comes after it was revealed inflation, which measures the rate UK consumer prices are rising at, remained at 2.2% last month.
The figure is just above the Bank’s 2% target, but its governor Andrew Bailey has warned people not to expect a sharp fall in rates in the coming months. Economists and investors are betting on rates to be left unchanged on Thursday and for the Bank to opt to cut them again in November instead.
Rob Wood, chief UK economist at economic research consultancy Pantheon Macroeconomics, said the inflation data released on Wednesday gave the Bank of England “little reason to rush to cut interest rates again” on Thursday. It still seems likely that they will decide to keep interest rates paused this month, and instead wait to cut rates again in November and December,” added Susannah Streeter, head of money and markets, at investment firm Hargreaves Lansdown.
Interest rates dictate the cost of borrowing set by lenders for loans such as mortgages and credit cards – as well as the returns on savings. While rates were cut for the first time since March 2020 last month, the cost of borrowing remains high, with homeowners on fixed rate mortgages still facing the prospect of much higher repayments when deals expire over the next few years.
Mr Bailey has previously warned the Bank must “make sure inflation stays low and be careful not to cut interest rates too quickly or by too much”. The decision to cut rates in August was tight. Five of the Bank’s nine-member Monetary Policy Committee (MPC), voted for a quarter point cut.
Source: BBC
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