Interest rates LIVE: Bank of England to announce major decision at 12pm

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The Monetary Policy Committee (MPC) will meet today to determine whether the Bank of England Base Rate will change. Most experts predict the MPC will hold interest rates at 4% after sticky inflation figures and an uncertain economic outlook.

The base rate significantly impacts the cost of mortgages and loans, and influences the interest rates banks offer on savings accounts. It peaked at 5.25% in late 2023, but policymakers have reduced it to 4% in the months since as inflation dropped to more manageable levels. It’s currently rising at a pace of 3.8% - far lower than the 11% highs seen during 2022’s energy crisis, but still higher than the Bank’s 2% target. The Bank of England typically raises interest rates when inflation is high to curb spending and slow price increases.

Charlie Ambler, co-chief investment officer and partner at wealth management firm Saltus, said: “All signs point towards a hold in the base rate this week, and previous expectations of one or two further interest rate cuts this year now look unlikely.”

However, he pointed out that today’s decision could be an “opportunity” to reassure the markets that the Bank will not deviate from its long-term plan.

He said: “Ahead of November’s Budget, where the Chancellor is expected to announce further tax hikes, the Bank has an opportunity to provide certainty for investors in the interim. However, with inflation unlikely to return to the 2% target until the second quarter of 2027, any forward guidance will likely remain cautious.”

Others argue the country’s current economic landscape does not call for tighter monetary policy.

Tom Clougherty, executive director at the free market think tank the Institute of Economic Affairs, said: “But measured inflation can have different causes. Sometimes it is caused by bad monetary policy, as in the pandemic, when broad money growth was exceptionally high. That kind of inflation can and should be controlled by the Bank of England.

"What's happening now looks different. Rising prices are in large part being driven by Government policy in the form of higher taxes and regulatory costs, as well as long-running supply constraints. That demands a programme of economic liberalisation – not tighter monetary policy."

He added: “This persistently high inflation underlines the fact that Britain has a serious cost-of-living problem. We are paying the price for years of poor economic management in the form of lower living standards.”

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