From Independent.: 2024-06-20 10:03:40

Interest rates have been frozen at 5.25% by the Bank of England for the seventh consecutive month, despite inflation dropping to 2%, the Bank’s target, for the first time in nearly three years. This could lead to a cautious rate cut in August, according to the Confederation of British Industry.

The decision to freeze interest rates has been met with disappointment from small businesses struggling to access affordable finance for growth. The Federation of Small Businesses warns that the high rates are undermining economic growth and risking snuffing out signs of recovery.

Following the rate decision, the pound edged lower against the US dollar and the euro, with sterling slipping 0.2% to $1.269 and 0.1% to €1.183. The decision comes as experts expect the Bank of England to avoid “rocking the boat” with interest rate cuts before the upcoming General Election.

The Bank’s governor, Andrew Bailey, emphasized the need to ensure that inflation remains low before cutting interest rates, citing stubborn services inflation and rising wage growth. The decision to hold rates unchanged was supported by a 7-2 majority vote from the monetary policy committee.

The Bank’s failure to cut interest rates has sparked criticism from the Unite union, which argues that high rates benefit city bankers at the expense of workers and families. The union calls for the UK to follow in the footsteps of other major economies that have cut interest rates to support economic recovery.



Read more at Independent.: UK interest rates: Bank of England announces interest rate decision after fall in inflation