BoE leaves the base rate unchanged
The Bank of England announced this week that the interest rate was to remain on hold, staying at 5%. The announcement came after May’s Monetary Policy Committee meeting, and most analysts and economists were not surprised, as the majority had predicted that the central bank was unlikely to cut interest rates twice in a row. The base rate was cut by 0.25% in April, taking it from 5.25% to 5%.
Millions of homeowners will have been disappointed with the decision, as it means that they will have to continue making higher personal loans repayments. Many industry professionals have also expressed disappointments, with officials from the British Chambers of Commerce stating that another interest rate cut would have boosted business and consumer confidence, describing the decision to leave rates on hold as a big mistake.
Following the decision one economist stated: ‘Today’s vote was probably very close given the conflicting indicators on the economy and inflation. Although the hawks appear to have won the day this time, the doves will have had plenty to argue about.’ Another said: : ‘Current elevated inflation levels and risks deterred the MPC from cutting loan interest rates for a second successive month despite mounting signs that the UK economic slowdown is deepening and widening amid tighter lending conditions.’
He also went on to state: ‘It seems odds-on that the Bank of England will trim interest rates from 5.00% to 4.75% in June, thereby maintaining the trend of cutting by 25 basis points every two months.’ Most industry officials are now predicting that the base rate will be cut again in June, and some believe that the base rate could eventually fall as low as 3.5%.
