Bank of England reduces base rate to 5%
As expected, the Bank of England lowered their base interest rate on August 1 from 5.25% to 5%. The decision was a close call, with five members voting in favor and four against.
The accompanying Monetary Policy Report explains that although higher interest rates have helped bring inflation back to the Bank’s 2% target, they anticipate a temporary rise to 2.75% later this year.
Why might inflation increase again?
The reduction in household energy prices has been helping to decrease inflation. However, as energy prices stabilize, their downward pressure on inflation will diminish. Prices for services such as hotels and restaurants, insurance, and rents for housing continue to rise significantly above past averages.
Additionally, the demand for goods and services this year has been higher than expected, which may further contribute to inflation.
The Bank considers this a temporary situation and expects inflation to return to their target level next year.
Is another cut likely?
The Bank is focused on ensuring that inflation remains low and has stated that they will not cut rates too much or too quickly. This indicates that a further cut when they next meet on September 19 is unlikely.
What should you do about the rate cut?
Regardless of future decisions, the reduction to 5% is beneficial for borrowers but may not favor savers.
Commercial banks usually follow the Bank of England’s lead, but not always to the same extent. If you have loans with variable interest rates, check to ensure that your rates decrease. Many loans and overdrafts are tied to the Bank of England’s base rate, so these should adjust automatically.
For savings, it might be worthwhile to shop around to find the best rates on the market. GET IN TOUCH WITH OUR WIMBLEDON ACCOUNTANTS to get advice tailored to your financial situation.
Stay informed on these changes and how they might impact you. For personalized assistance, GET IN TOUCH WITH OUR WIMBLEDON ACCOUNTANTS, who are ready to help you navigate these adjustments.
See: Bank of England Monetary Policy Report – August 2024
#Bankofengland #bank #Wimbledon #UK #accounting #accountants