Inflation is slowing but at 7.9% it remains well above the Bank of England’s 2% target
The Bank of England raised interest rates for the 14th time in a row today, by 0.25%. The Bank’s Monetary Policy Committee voted by a 6-3 majority in favour of the rate rise.
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At 5.25%, interest rates are at a “fresh 15-year high”, said The Times Money Mentor. Monthly repayments will increase for “around 1.4 million mortgage holders on tracker deals” as a result, which may have a knock-on impact for some tenants in privately rented accommodation.
But the rise does “mark a smaller increase than July’s dramatic rise” from 4.5% to 5%, suggesting “price rises have begun to ease”, said the BBC. And “banks may offer greater returns on savings accounts”.
The consumer prices index (CPI) dropped to 7.9% in the year to June, a fall that was “larger than expected”, said The Times Money Mentor. The Bank of England (BoE) hopes that raising rates will help to further ease inflation, but the CPI remains “well above most industrial nations”, said The Guardian, and is “almost four times the Bank’s 2% target”.
Rishi Sunak told LBC yesterday that there is “light at the end of the tunnel” for many people in the UK, but admitted that progress on his promise to halve inflation by the end of the year was not moving as quickly as he would like. He said he was making “difficult but responsible decisions” in order to “bring down inflation for everyone”.
In the US and the eurozone, “hopes are rising that interest rates are close to a peak”, said the Financial Times, while in the UK, financial markets are expecting further 0.25% increases before the end of the year.
Announcing the increase, the BoE said it expects inflation to drop “markedly” this year, and that its target of 2% could be met by early 2025.
