The Bank of England is poised to hold borrowing costs at 3.75% after better-than-expected inflation data and the promise of a US-Iran peace deal put the brakes on a predicted rate increase, according to economists.
Inflation Data Surprises
Latest inflation figures have strengthened expectations that policymakers will leave interest rates unchanged on Thursday. The official figures showed the rate of Consumer Prices Index (CPI) inflation stayed at 2.8% in May, the same as in April. It was lower than expected by economists, who had predicted an uptick in inflation to 3%.
While remaining above the Bank's 2% target level, the lack of movement in May will provide some relief to its Monetary Policy Committee (MPC) which uses interest rates as a tool to control inflation.
Market Reactions
Financial markets had anticipated a rate rise earlier this month, but the combination of steady inflation and geopolitical developments has shifted expectations. The potential US-Iran peace deal is seen as a factor that could reduce global economic uncertainty and inflationary pressures.
What This Means for Borrowers
For homeowners and borrowers, a hold on rates means mortgage payments are unlikely to increase in the short term. However, savers may continue to benefit from relatively high savings rates.
The Bank's decision will be announced at 12pm today, with Governor Andrew Bailey expected to provide comments on the economic outlook.
