Bank of England Holds Interest Rates at 5.25% pa

The Bank of England Monetary Policy Committee has today confirmed that its central bank interest rate will remain at 5.25% for the 10^th consecutive month.

Yesterday, the Office for National Statistics reported that UK inflation had fallen to the Bank of England’s ‘trend growth’ target rate of 2% pa.  This does give the Bank some room for manoeuvre.  That said, the Bank had already suggested that it would not make an interest rate change this month due to the General Election on 4^th July.  This is usual as the Bank of England does not want to make any ‘political statements’ or have any influence either way on the electorate of the coming vote.

We have long forecast that interest rates may even not come down until September or early Autumn given:

• The energy price cap is reduced in July meaning even lower inflation (we hope).
• The next Bank of England rate decision is not until 1 August and July’s inflation figures will not be out until mid August meaning that it could be as long as September before a new rate decision.
• Parliament was due to close for Summer Recess on 8^th July but given Parliament is currently dissolved (and therefore there are no MPs) pending the General Election, it looks like we will have a new government for a few days and then they all ‘disappear’ on their ‘jollies’ for a couple of months before heading in Conference Season in September. 

Comment

June’s inflation figures are due in July, so it is possible that the Bank may cut rates in August although given any new Parliament will likely be closed for Summer Recess, so the Bank may again wait until September.