Bank of England maintains interest rate at 5.25%
After the recent decision made by the Monetary Policy Committee, economists and borrowers are now focusing on the upcoming August vote for potential interest rate cuts.
In a move that was widely anticipated, the Bank of England (BoE) has decided to keep the interest rate at 5.25 percent, even though inflation had reached the bank’s target of two percent in May.
The government has praised the decrease in inflation to the two percent target.
Prime Minister Rishi Sunak stated that inflation returning to normal signifies a positive development for the UK economy.
However, the BoE affirmed its commitment to maintaining a restrictive monetary policy until inflation consistently remains at the two percent target.
The MPC summary stated, “For some members within this group, the return of headline inflation to 2 percent, while welcome, was not necessarily indicative of the required sustained return to target.”
Regarding borrowing and expected interest rate cuts, borrowers will not see any relief in mortgage expenses as interest rates remain unchanged. They will have to wait until the August decision for potential cuts.
On the topic of the general election scheduled on July 4, MPC members clarified that the timing of the election does not impact their decision-making process, which is based on achieving sustainable inflation targets.
Looking ahead, the next MPC vote is set for August 1, where members will assess all available information to determine the risks of inflation persistence.
Furthermore, central banks in Europe have started to lower interest rates. The Swiss National Bank reduced rates by 25 percentage points to 1.25 percent, while the European Central Bank cut its main interest rate from 4 percent to 3.75 percent.
The MPC emphasized its commitment to monitoring inflationary pressures and the overall resilience of the economy as a whole.
