The Bank of England has kept interest rates at the 16-year high of 5.25 per cent.
The last rate increase occurred in August 2023, concluding a streak of 14 consecutive rises starting from December 2021.
Hymans Robertson head of capital markets Chris Arcari says: “As expected, the Bank of England (BoE) has left rates unchanged at a 16-year-high of 5.25 per cent pa this morning. Despite a small upside surprise in March’s release, year-on-year headline CPI inflation has continued to moderate in recent months, to 3.2 per cent. Indeed, energy price falls and their interaction with the UK price cap, alongside goods and food price disinflation, mean comparable year-on-year headline CPI is likely to fall below target in the coming months.
“However, year-on-year core inflation, which excludes volatile energy and food prices, is running at 4.2 per cent year-on-year – more than double the BoE’s target. There remains uncertainty over how quickly inflation will reach its target on a sustainable basis with services and wage inflation both running at 6 per cent year-on-year and slowing less sharply.
“Nonetheless, we continue to expect the BoE to cut rates this year. We expect the bank to tread cautiously by reducing rates slowly to less restrictive levels given the massive overshoot of inflation in 2022 and 2023. Markets have also coalesced around this view in recent months – markets were somewhat optimistically implying between six and seven 0.25 per cent pa interest rate cuts at the start of the year. These expectations have now moderated to, what is in our opinion, a more realistic expectation of between one and two 0.25 per cent pa cuts in 2024.”
My Pension Expert policy director Lily Megson says: “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.”
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