The Bank of England (BoE) has opted to maintain interest rates at 5.25% for the fifth time in a row, as the Monetary Policy Committee (MPC) continues its balancing act between taming inflation and avoiding economic stagnation.
No Change Despite Pressure
The MPC voted 7-2 in favour of holding the base rate steady, with two members advocating for a cut. The decision comes despite mounting political and public pressure to ease borrowing costs, as households and businesses grapple with high mortgage rates and sluggish growth.
Inflation Still Above Target
While inflation has fallen significantly from its 2022 peak of 11.1%, the current 3.2% rate remains above the BoE's 2% target. Governor Andrew Bailey cautioned that "the job isn't done yet," signalling that rate cuts may still be some way off.
Political Reactions
Chancellor Rachel Reeves acknowledged the challenges facing the economy, stating that "tough decisions lie ahead" to stabilise public finances while supporting growth. Opposition critics argue that prolonged high rates risk tipping the UK into recession.
What This Means for You
- Mortgage holders: No immediate relief for those on variable-rate deals
- Savers: High street banks continue offering competitive savings rates
- Businesses: Borrowing costs remain elevated, potentially limiting investment
Economists now predict the first rate cut may come in August or September, assuming inflation continues its downward trajectory. However, with global oil prices volatile and wage growth persistent, the BoE maintains a cautious stance.
