From Morningstar: 2024-05-09 08:10:00

The Bank of England has decided to keep its base rate at 5.25%, with a 7-2 majority vote by its Monetary Policy Committee. This decision aligns with market expectations, and the FTSE 100 saw a slight increase of 0.38%.

The BoE stated that inflation is expected to fall below its 2% target within two years, with a temporary rise in the near-term due to energy-related factors. Geopolitical risks could impact inflation, but the Bank projects rates of 1.9% in two years and 1.6% in three years.

The future of interest rate cuts sparks speculation on consumer impacts, as lower rates could reduce returns on savings but make consumer debt more manageable. Equities may benefit more than bonds from rate cuts in the market.

Reaction from financial services experts reflects concerns on housing market impacts and the need for government support in the face of sustained higher rates. The potential effects on savers and borrowers are at the forefront of discussions.

The impact of interest rate changes on the real economy could result in increased consumer spending and improved GDP growth. Businesses could benefit from lower rates, although uncertainties remain about the exact outcomes in the coming years.



Read more at Morningstar: No Cut in Sight as Bank of England Holds Rates