Interest rates have been frozen by the Bank of England for the seventh consecutive month despite another drop in inflation. Bank chiefs on Thursday held the rate at 5.25 per cent in another blow to workers, homeowners and borrowers. It comes after official figures published on Wednesday showed that rising prices had fallen back to 2 per cent – the Bank’s target – for the first time in nearly three years, down from 2.3 per cent in May. The latest inflation figures mean that prices are still rising across the country, but at a much slower rate than in recent years when households and businesses were being squeezed during the peak of the cost crisis. After the fall in inflation, the Confederation of British Industry (CBI) said the stage was now set for the bank to cautiously cut interest rates in August.
UK interest rates: Bank of England announces interest rate decision after fall in inflation
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Interest rates have been frozen by the Bank of England for the seventh consecutive month despite another drop in inflation.
Bank chiefs on Thursday held the rate at 5.25 per cent in another blow to workers, homeowners and borrowers.
It comes after official figures published on Wednesday showed that rising prices had fallen back to 2 per cent – the Bank’s target – for the first time in nearly three years, down from 2.3 per cent in May.
The latest inflation figures mean that prices are still rising across the country, but at a much slower rate than in recent years when households and businesses were being squeezed during the peak of the cost crisis.
After the fall in inflation, the Confederation of British Industry (CBI) said the stage was now set for the bank to cautiously cut interest rates in August.
CBI principal economist Martin Sartorius said on Wednesday: “Today’s data sets the stage for the Monetary Policy Committee to cut interest rates in August, in line with our latest forecast’s expectations.”
Key points
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We need to be sure inflation stays low, Bank governor says
Officials “need to be sure” inflation will stay low before cutting interest rates, the Bank’s governor Andrew Bailey has said.
The decision comes a day after official figures showed the rate of inflation hit the Bank’s 2 per cent target in May for the first time in nearly three years, prompting the prime minister to declare “we’ve got there” after the milestone was reached.
However, some policymakers on the Bank’s nine-person Monetary Policy Committee (MPC) felt that “more evidence of diminishing inflation persistence was needed” before they could safely cut rates.
In particular, they felt that services inflation – which looks only at service-related prices such as hospitality and culture – had remained stubborn, and wage growth was rising faster than forecast.
Britain Economy
Matt Mathers20 June 2024 12:21
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IPPR: Interest rates too high for too long
Interest rates have been too high for too long, an economic think tank has said.
Dr George Dibb, associate director for economic policy at IPPR, said: “The Bank of England has tightened the screws too much for too long, holding back the UK’s economic recovery. It should have followed the European Central Bank by starting to cut rates today.
“The Bank has to balance lingering price rises, notably in services, with the UK’s zero economic growth and a cooling labour market. With inflation expectations back down to pre-pandemic levels, it’s time for the Bank to switch gears, support the economy more, and cut rates.”
Matt Mathers20 June 2024 12:13
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7-2 majority vote for rate freeze
The central bank’s monetary policy committee voted by a majority of seven to two to keep rates unchanged.
Members Dave Ramsden and Swati Dhingra voted to cut rates by 0.25 percentage points.
Matt Mathers20 June 2024 12:11
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Bank failing to act in interest of workers – union
The Bank of England has “failed to act in the interest of workers” by deciding against a cut to interest rates, a union has said.
Sharon Graham, Unite general secretary, said: “Once again, the Bank of England has failed to act in the interest of workers and hard-pressed families.
“Major economies across the world have cut interest rates and the UK must follow suit. High interest rates boost the profits of city bankers but hit all of us paying mortgages and rents in the pocket. It’s time for the bank to get a grip.”
Unite union general secretary Sharon Graham (PA) (PA Archive)
Matt Mathers20 June 2024 12:09
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Graph shows interest levels since 2007
(PA Wire)
Matt Mathers20 June 2024 12:06
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Breaking: No fall in interest rates despite inflation hitting 2% target, Bank of England announces
Homeowners struggling with soaring mortgages will be forced to wait at least another two months for borrowing costs to fall, after the Bank’s nine-member Monetary Policy Committee opted on Thursday to hold the base rate at 5.25 per cent for the seventh consecutive month.
More to follow on this breaking news story:
Matt Mathers20 June 2024 12:03
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UK borrowing costs set to stay the same despite inflation hitting 2% target
Borrowers hoping for some relief from higher costs are likely to be disappointed by expectations that UK interest rates will not be cut on Thursday, despite inflation returning to target.
Most economists are expecting policymakers to hold UK interest rates at 5.25 per cent when the central bank announces its latest decision.
Matt Mathers20 June 2024 10:08
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How does inflation affect interest and mortgage rates?
Matt Mathers20 June 2024 08:27
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Recap: Inflation returns to 2% target for first time in nearly three years
Inflation has returned to the 2% target for the first time in almost three years in what comes at a critical time, just weeks before the nation heads to the polls.
Matt Mathers20 June 2024 07:52
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Rates decision at lunchtime
Good morning and welcome to the Independent’s coverage of interest rates.
The Bank of England is set to announce later whether or not it will cut rates after inflation fell back to 2 per cent on Wednesday.
Analysts expect rates to be held at 5.25 per cent despite the drop in rising prices.
A decision is expected around lunchtime – stay tuned for the latest updates.
Matt Mathers20 June 2024 07:33
Read the full story on www.independent.co.uk
https://www.independent.co.uk/news/uk/home-news/uk-interest-rates-rise-fall-update-b2565590.html