The Bank of England today (Thursday, September 21st) chose to leave the UK’s interest rates unchanged at 5.25%.
The Bank (BOE) had previously raised rates 14 times in a row, in a battle to bring down inflation. That had led to increases in mortgage payments, but also higher savings rates.
It was tipped as being a knife-edge decision and so it proved, with the Monetary Policy Committee voting by the narrow margin of 5-4 to keep the base rate at 5.25%, in a boost for borrowers.
That decision came a day after figures from the Office for National Statistics had shown an unexpected slowdown in inflation, dropping to 6.7% in August from July’s rate of 6.8%.
It marks the sixth straight decline in the UK’s inflation rate, and the BOE’s decision does raise the prospect that the cycle of rate increases may have peaked.
However, that does not necessarily mean that prices are falling, only that they are rising at a slower pace.
The BOE’’s Governor Andrew Bailey was optimistic, however. “Inflation has fallen a lot in recent months, and we think it will continue to do so,” he said.
The cost of living pressure on UK households remains problematic – and the current price of oil has led to an increase once again in petrol and diesel.
Figures also show that food and drink prices increased by 13.6% in the year to August 2023. That was lower than their peak inflation rate of 19.1% earlier this year but it is still pretty high by historical levels.