The
Bank
of
England
(BoE)
has
held
its
base
rate
at
5.25%,
after
a
majority
decision
of
7-2
at
its
Monetary
Policy
Committee
(MPC)
voted
in
favour
of
keeping
the
status
quo
at
a
meeting
yesterday.
The
move
was
in
line
with
market
consensus.
At
the
time
of
writing
the
FTSE
100
was
trading
up
slightly
by
0.38%.
“At
its
meeting
ending
on
8
May
2024,
the
MPC
voted
by
a
majority
of
7–2
to
maintain
Bank
rate
at
5.25%.
Two
members
preferred
to
reduce
Bank
Rate
by
0.25
percentage
points,
to
5%,”
the
Bank
said.
In
its
press
statement
at
midday
today,
the
BoE
added
that,
in
time,
it
actually
now
expects
inflation
to
fall
to
below
its
2%
target
within
two
years,
though
it
will
likely
rise
in
the
near-term
before
falling
once
more.
“CPI
inflation
is
expected
to
return
to
close
to
the
2%
target
in
the
near
term,
but
to
increase
slightly
in
the
second
half
of
this
year,
to
around
2½%,
owing
to
the
unwinding
of
energy-related
base
effects,”
it
said.
“There
continue
to
be
upside
risks
to
the
near-term
inflation
outlook
from
geopolitical
factors,
although
developments
in
the
Middle
East
have
had
a
limited
impact
on
oil
prices
so
far.
“Conditioned
on
market
interest
rates
and
reflecting
a
margin
of
slack
in
the
economy,
CPI
inflation
is
projected
to
be
1.9%
in
two
years’
time
and
1.6%
in
three
years
in
the
May
Report.”
It
gave
very
little
indication
of
when
the
rate
cutting
process
might
begin.
“The
MPC
remains
prepared
to
adjust
monetary
policy
as
warranted
by
economic
data
to
return
inflation
to
the
2%
target
sustainably,”
it
said
generically.
“It
will
therefore
continue
to
monitor
closely
indications
of
persistent
inflationary
pressures
and
resilience
in
the
economy
as
a
whole,
including
a
range
of
measures
of
the
underlying
tightness
of
labour
market
conditions,
wage
growth
and
services
price
inflation.”
Reaction
From
The
City
and
Financial
Services
Ben
Nichols,
Interim
Managing
Director,
RAW
Capital
Partners:
“That
the
base
rate
has
remained
static
for
nine
months
has
afforded
homebuyers
and
investors
a
degree
of
certainty.
But
higher
borrowing
costs
will
continue
to
squeeze
house
prices,
and
this
will
naturally
weigh
on
the
minds
of
both
buyers
and
sellers.
Moreover,
it
places
the
emphasis
on
how
lenders
and
brokers
can
best
support
borrowers
in
this
higher-rate
environment.”
Lily
Megson,
Policy
Director,
My
Pension
Expert:
“While
high
interest
rates
are
often
touted
as
good
news
for
savers,
the
harsh
reality
is
that
an
unchanged
base
rate
feels
like
Groundhog
Day
for
Britons.
“Indeed,
the
hold
comes
hand
in
hand
with
the
ongoing
burden
of
sticky
inflation
and
the
weighty
cost
of
borrowing.
For
some
savvy
savers,
there
is
a
silver
lining
to
continued
higher
rates
–
namely,
strong
returns
on
fixed-term
products
like
annuities.
Yet
in
truth
inflation
has
not
fallen
quickly
enough,
with
millions
struggling
to
save
for
long-term
goals
such
as
retirement.
“People
should
not
be
left
to
weather
this
storm
alone,
as
the
government
has
a
critical
role
to
play
in
ensuring
access
to
independent
financial
advice
and
guidance
for
all.
And
with
a
general
election
fast
approaching,
it’s
in
their
own
interest
to
take
action
sooner
rather
than
later.”
How
Would
a
Future
Interest
Rate
Cut
Affect
Me?
As
the
Bank
announces
another
rate
hold,
chatter
turns
to
when
the
cutting
cycle
might
begin.
But
what
would
that
mean
for
consumers,
and,
crucially,
those
with
savings
and
investments?
As
interest
rates
decrease,
cash
savings
rates
on
bank
accounts
and
ISAs
will
likely
decrease,
meaning
savers
may
start
getting
less
bang
for
their
buck
at
the
bank.
However,
lower
rates
will
also
make
consumer
debt
cheaper,
which
could
bring
relief
to
people
with
substantial
credit
card
debt –
and
mortgage
holders
with
variable-rate
products.
Those
who
have
remortgaged
into
fixed-rate
products
in
the
last
two
years
may
not
feel
this
until
they
remortgage
once
more.
What
Will
Equities
and
Bonds
do
if
Rates
Are
Cut?
Markets
tend
to
“price
in”
any
changes
very
quickly,
so
the
reaction
to
this
kind
of
news
will
be
swift.
Conventional
wisdom
suggests
rate
cuts
are
better
for
equities
than
bonds.
But
while
bonds
have
returned
to
favour
in
the
higher
interest
rate
era
because
of
their
tempting
yields,
rate
cuts
may
not
be
bad
for
them
either.
Falling
interest
rates
mean
lower
yields,
which
push
bond
prices
ever
higher
–
a
key
factor
in
total
returns.
And
lower
rates
make
existing
bonds,
and
particularly
those
already
issued
during
a
period
of
rate
hikes,
more
attractive
for
yield.
In
addition,
many
pension
funds,
for
whom
rising
bond
yields
have
caused
havoc,
could
also
stand
to
benefit
from
a
looser
monetary
approach.
This
may
well
benefit
the
government’s
attempts
to
reignite
the
UK’s
stagnant
economy
as
(in
theory)
it
encourages
institutional
investors
to
plough
money
into
promising
growth
businesses.
How
Will
The
Real
Economy
React?
Over
in
the
“real
economy”,
the
unwinding
of
monetary
policy
will
likely
also
benefit
shops
and
online
businesses
who
have
been
squeezed
by
the
twin
spectres
of
supply
chain
inflation
and
lower
consumer
confidence.
If
higher
interest
rates
have
the
power
to
curb
spending
in
the
UK
economy
and
cool
gross
domestic
product
growth,
lower
rates
will
in
theory
create
the
opposite
effect.
In
practice,
however,
there
is
a
lot
of
uncertainty.
While
lower
interest
rates
tend
to
stimulate
the
economy,
the
UK
is
still
expected
to
suffer
from
low
growth
in
the
coming
years
wherever
rates
end
up.
Either
way,
it
will
take
time
for
the
precise
effects
to
be
visible,
let
alone
quantifiable.
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