Bank of England expected to hold interest rates

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Written by: Jane Smith

The upcoming decision on interest rates by the Bank of England is eagerly anticipated. After a reduction to 4.25% in early May, the Monetary Policy Committee (MPC) suggested the possibility of further cuts. However, experts believe that any additional reductions may be postponed due to inflation rates remaining above the target. The Bank rate plays a pivotal role in determining borrowing costs for lenders and the returns for savers offered by banks and building societies.

The Committee’s announcement on interest rates is scheduled for 12:00 BST. Following the reduction in May from 4.5% to 4.25%, it marked the fourth decrease over the past year. While expectations lean towards a continued downward trend in interest rates, the MPC must address complex and conflicting issues when making their decision.

The UK economy’s growth has been lackluster, prompting calls for rate cuts to stimulate investment and economic expansion. A setback occurred in April when the economy unexpectedly contracted by 0.3% due to increased business taxes, rising household bills, and a decline in exports to the US. Despite this, inflation remained high at 3.4% in May, with a notable spike in food prices putting additional strain on households.

In addition to domestic factors, global tensions play a role in the Committee’s decision-making process. Uncertainties stemming from conflicts between Israel and Iran may push oil prices higher, impacting inflation rates. Concurrently, the aftermath of US tariff policies must also be taken into account. While many economists predict two interest rate cuts this year, others foresee only one. Monica George Michail, associate economist at the National Institute of Economic and Social Research, emphasized the persistent inflation levels and economic uncertainties that may prompt the Bank to maintain rates and implement a single cut later in the year

Read the full article from The BBC here: Read More

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