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