Bank rate maintained at 5.25% – June 2024
The Bank of England’s Monetary Policy Committee (MPC) has decided to keep the Bank Rate at 5.25%. This decision has important implications for everyone, especially those with mortgages or looking to protect their financial future. Here’s a simple breakdown of what this means for you.
What is the Bank Rate?
The Bank Rate, set by the Bank of England, influences the interest rates that banks and lenders charge for loans, including mortgages. When the Bank Rate is high, borrowing costs more, and saving earns more. Conversely, a low Bank Rate makes borrowing cheaper but reduces the interest on savings.
Current Economic Context
- Inflation: The MPC aims for a 2% inflation rate to ensure stable prices. In May, the twelve-month CPI inflation dropped to 2.0% from 3.2% in March. Although this is good news, inflation is expected to rise slightly later in the year as past energy price drops fall out of the yearly comparison.
- Economic Growth: The economy has grown more than expected in the first half of the year, though business surveys suggest growth may slow to around 0.25% per quarter.
- Labour Market: The labour market is loosening, meaning fewer job vacancies and a slight easing in pay growth. However, it’s still tight by historical standards, which impacts wage inflation.
Find out Your Options
Key Points from the MPC Meeting
- Decision on Bank Rate: The MPC voted 7-2 to maintain the Bank Rate at 5.25%. Two members preferred to reduce it to 5%.
- Inflation Trends: While inflation has fallen to the target level, it is predicted to rise slightly due to past energy price fluctuations.
- Economic Activity: The restrictive monetary policy is currently limiting economic activity, contributing to a looser labour market and easing inflation pressures.
- Monetary Policy Stance: The MPC believes that a strict monetary policy is necessary to ensure inflation remains at 2% in the medium term.
Why Maintain the Bank Rate at 5.25%?
Maintaining the Bank Rate at 5.25% is a strategic move to control inflation and keep it at the desired 2%. The MPC acknowledges that while inflation has hit the target, the economic environment remains uncertain. By keeping the rate steady, the MPC aims to prevent inflation from becoming entrenched above 2%.
Conclusion
At Kerr & Watson, we specialise in providing personalised mortgage and protection advice tailored to your needs. Contact us today to discuss how these changes affect you and to find the best financial solutions for your situation.
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