The Bank of England (BoE) has opted to uphold its interest rates at a 16-year high for the time being, a decision announced by the Monetary Policy Committee (MPC) on Thursday. Despite recent spikes in mortgage costs, the current rate stands firm at 5.25 per cent, a level set last August, dashing hopes for a potential reduction which hasn't been seen since 2020.
This decision comes amidst concerns about the impact of high interest rates on homeowners, who have faced escalating mortgage repayment costs. The BoE employs high interest rates as a strategy to combat inflationary pressures.
While there was a slight dip in the rate of Consumer Prices Index (CPI) inflation to 3.2 per cent in March, analysts pointed out that two significant economic indicators, namely pay growth and services sector inflation, have shown resilience, indicating persistent inflationary pressures.
In a more optimistic turn, the Bank revised its forecasts, anticipating a decline in CPI inflation to 2.25 per cent next year and further down to 1.5 per cent by 2026. Additionally, it expects the UK economy to see growth of 0.5 per cent this year and 1 per cent in 2025, slightly higher than previous estimations.
The BoE's decision to maintain interest rates underscores its commitment to managing inflationary risks, even as households grapple with heightened mortgage costs. With inflation dynamics and economic growth projections in focus, the Bank continues to navigate the delicate balance between stimulating economic recovery and containing price pressures.
