Inflation is down, but the base rate has been held at 5.25% yet again. When is it likely to come down, and what’s happening with interest rates? Find out more…
The Bank of England’s base rate has remained the same in today’s review despite yesterday’s news about inflation reaching its 2% target for the first time in three years.
Consumer Prices Index (CPI) inflation stood at 2% in May, down from 2.3% in April. This is the first time inflation has been at the Bank of England’s target figure of 2% since July 2021.
However, the Bank of England’s Monetary Policy Committee met on 20 June and agreed to keep the base rate at 5.25% for the time being. It has been at this level since August 2023.
Will there be a base rate cut this year?
While we can’t say for sure what will happen (especially in light of the upcoming general election), it’s widely anticipated that the bank will finally cut the base rate later in the year.
While CPI inflation reaching its target is good news, it’s not enough to confirm that the battle against inflation is completely over.
CPI inflation relates to a basket of goods typically purchased by a household (such as items like bread, cereals, and vegetables), but service inflation (covering services like education and hospitality) only fell to 5.7% in May. This was down from 5.9% in April. While this may sound like good news, the drop was less than the 5.5% figure predicted by economists.
However, food prices overall are still 25% higher than at the beginning of 2022. Petrol prices have also risen.
What about mortgage interest rates?
As for mortgage interest rates in general, NatWest became the first major lender to cut its rates by 0.17 percentage points yesterday, according to the Telegraph, while some smaller lenders have made reductions of around 0.22 percentage points. Mortgage rates had previously gone up in the past few weeks as financial markets identified that the base rate cut would not happen as soon as previously predicted.
We will keep you updated on any future base rate or interest rate changes.