Bank of England keeps interest rates at 5.25%

Written by Michael Griffiths

21/06/2024

The Bank of England (BoE) has opted to keep its base rate at 5.25%, the seventh time in a row the central bank has held interest rates.

While economic forecasters are still expecting interest rates to fall later this year, the current base rate, which was set last August, will continue to stay at its 16-year high.

At this week’s meeting, the Bank’s Monetary Policy Committee (MPC) voted by a majority of seven to two to maintain the base rate at 5.25%. Two members were in favour of a reduction by 0.25 percentage points, to 5%.

Despite yesterday’s inflation figure from the Office for National Statistics (ONS), which saw consumer price index (CPI) inflation fall back to the BoE’s 2% target for the first time in almost three years, the latest MPC report has warned that the 12-month CPI inflation rate is expected to rise slightly in the second half of this year, as declines in energy prices last year fall out of the annual comparison.

“Monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term in line with the MPC’s remit,” the MPC report said.

“The Committee has judged since last autumn that monetary policy needs to be restrictive for an extended period of time until the risk of inflation becoming embedded above the 2% target dissipates.”

Prior to the BoE’s recent moves to hold interest rates for seven times in a row, the central bank had raised its base rate at 14 successive MPC meetings since December 2021, a cycle that has helped to slow the rate of inflation, but also led to large increases in mortgage payments.

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