From Morningstar:

The Bank of England’s rate hold has sparked questions about potential interest rate cuts. Last year, Goldman Sachs predicted rate cuts in February and March, but that now looks unlikely. This has led to speculation that the BoE may have a future rate hike before easing monetary policy, affecting cash savings, debt, mortgages, equities, and bonds.

Over the past two years, higher interest rates theoretically meant better cash savings rates but also increased debt expenses, pressuring credit card and mortgage holders. Rate hikes could cause disruptions for those with variable rate products and anyone due to remortgage soon, raising concerns for consumers and businesses alike.

Markets are expected to react quickly to any changes. Generally, rate hikes are better for bonds than equities. However, a rate hike would disrupt the narrative that rates will be cut heavily in 2024 and 2025, causing bond prices to fall. This could lead to lower total returns this year. But bond investors might take the longer-term view where prices will rise as yields fall in the future.

Higher interest rates will affect businesses and high street shops by highlighting the cost of their debt and could discourage consumer spending to avoid potential losses in savings rates. Despite this, the UK is still expected to suffer from low growth in the coming years regardless of where rates end up.



Read more: How Would Another BoE Rate Hike Affect Me?