Bank of England holds interest rates at 5.25%

By Staff

The Bank of England has held the base rate of interest at 5.25% as widely expected. Despite a surprise dip in inflation last month, the central bank’s Monetary Policy Committee (MPC) chose to hold the rate for the fifth time in a row.

At its meeting on Wednesday (March 20), the MPC voted by a majority of 8–1 to maintain the bank rate. One member preferred to reduce the rate by 0.25 percentage points, to 5%.

In February, inflation dropped slightly faster than expected, hitting 3.4% during the month – the lowest for two and a half years. Some economists have said they expect the MPC to finally announce a cut to the base rate in June or perhaps August.

Andy Mielczarek, founder and chief executive of SmartSave, a Chetwood Financial company, said now was “not the time” for the Bank of England to reduce the base rate.

He said the central bank was likely to be “wary” of a potential uptick in inflation that could happen as a result of tax cuts and minimum wage rises in the coming months.

“The risk that inflation will rise again is still too great,” he said. “For those in a position to do so, now is an opportune moment for consumers to take advantage of the available savings opportunities, as we should expect rates to fall as we move closer to the Bank’s eventual decision to cut the base rate.”

Paresh Raja, chief executive of Market Financial Solutions, said although inflation data didn’t fall enough to move the needle for the Bank of England, the property market was already benefitting from the stability of a static rate.

“Mortgage rates have fallen, buyer demand has risen, and we’ve seen a return to growth where house prices are concerned, all contributing to a solid start to the year for the property market,” he said.

“Clearly, buyers are adapting to the higher rate environment, and lenders are being bolder in the rates and products they are offering. This is important – even when the Bank does cut the base rate, we have to be realistic in accepting that rates will not come down as quickly as they went up, so the market has to adjust to a different interest rate environment.”

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