The Monetary Policy Committee (MPC) will meet today to determine whether the Bank of England Base Rate will rise, fall, or remain the same. Since August, the MPC has been gradually cutting borrowing costs, easing pressure on some borrowers who have been able to offer lower mortgage rates.
However, it’s widely expected that interest rates will be held at 4.5% today as global uncertainty grows.
Consumer Prices Index (CPI) inflation rose to 3% in January, with price pressure mainly being driven by energy prices, water bills and bus fares. At the same time, the UK economy has been teetering on the edge of decline – with gross domestic product (GDP) rising by 0.1% over the final three months of the year but contracting by 0.1% in January.
The Organisation for Economic Co-operation and Development (OECD) cut the UK’s economic forecast this week. The OECD warned that “further fragmentation of the global economy” was a significant concern amid trade tensions sparked by US President Donald Trump. This would likely increase inflation around the world and further impact living standards, the OECD warned.
With Bank Governor Andrew Bailey stressing intentions to take a “gradual and careful approach” to reducing rates, most analysts anticipate a dovish freeze on Thursday followed by a greater likelihood of cuts in May. Sanjay Raja, senior economist for Deutsche Bank, said: “Given the broad consensus for a ‘careful’ approach to removing policy restraint, we expect the MPC to be in no rush to cut rates on March 20.”
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