Latest Interest Rate Update: UK Holds Steady, What’s Next?
Oct 3
2 min read
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In its latest Monetary Policy Committee (MPC) meeting, the Bank of England decided to keep the base interest rate steady at 5%. Announced in late September 2024, this decision wasn’t unexpected, given ongoing concerns about inflation. While inflation has dropped significantly from its peak in 2022, it remains a primary focus for the central bank as it aims to return to its 2% target.
Why Keep Rates Unchanged?
The MPC stressed the need for a firm monetary stance to keep inflationary risks under control in the medium term. Governor Andrew Bailey reinforced this cautious approach, explaining that even though inflation has eased, uncertainties linger. He remarked, "We need to be certain that inflationary pressures have fully dissipated before considering any significant policy changes."
This decision aligns with global trends, as central banks like the US Federal Reserve and the European Central Bank are also adopting a careful stance, hinting at a broader global move toward more measured monetary easing soon.
What’s Next for Interest Rates?
While the rate holds at 5% for now, market watchers are looking ahead to possible rate cuts by November. Experts predict a gradual reduction, with a potential first cut of 25 basis points if inflation continues to decline and economic conditions stabilize. Analyst Bartholomew noted that the upcoming October budget could influence these adjustments, suggesting, "Any fiscal changes could pave the way for quicker cuts."
Impact on Mortgages and Consumers
For homeowners and borrowers, maintaining the 5% rate means higher mortgage rates will persist, particularly for those on variable or tracker mortgages. However, there’s been a slight dip in fixed-term mortgage rates since the last MPC meeting in August, providing some relief to new borrowers. Still, how much relief will depend on how swiftly future rate cuts occur.
As inflation remains a key concern, the Bank of England is taking a cautious yet deliberate approach, aiming to balance controlling inflation with fostering economic stability.
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