Bank of England Holds the Line—Rate Stays at 5.25%
After a hot wait‑list on the policy track, the Bank of England’s Monetary Policy Committee (MPC) is set to keep the base rate at 5.25% for the closer of four consecutive meetings. The decision comes as policymakers hold their breath for more definitive evidence that the London‑based central bank’s cost‑of‑living crisis is finally easing.
Why the 5.25% Standoff?
- Inflation hasn’t taken a dip yet: The Consumer Prices Index (CPI) ticked up to 4% in December — the first rise since February 2023. That nudge makes cutting rates a risky move.
- “Very slim” prospect of a cut: Economists agree that a drop in interest rates is unlikely in the near term, with the MPC leaning towards restraint rather than a loosening of the monetary policy stance.
- Axing the base rate would nearly hit a 16‑year high: Skipping the cut might keep borrowing costs elevated for the long haul.
Voices From the Bottom‑Line Experts
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said:
“With inflation ticking back up in December, it’s likely to have quelled the immediate urges from the MPC for rate cuts. Three of the nine members have already voted for a rise in the last meeting, and the chances of a reduction here look very slim indeed.”
But not all analysts are wholly pessimistic.
- Andrew Goodwin (Oxford Economics) offered a tempered optimism: “The surprise rise in December isn’t likely to frighten the MPC towards an imminent cut.” He added that policymakers might wait for a consistent decline in price and wage pressures before considering a “cut” button.
- Philip Shaw (Investec Economics) expected a “hold” vote: “The MPC likely votes to keep the base rate on Thursday, awaiting concrete evidence that inflation’s creeping toward the 2% target and the economy remains subdued.”
What Shaped The MPC’s Outlook?
Several signals point to a restrained stance:
- Inflation creeping upward at the tail end of the year.
- Three MPC members taking an ultra‑cautious stance toward inflation risks.
- The hope that future data will confirm a steady breakthrough to the 2% inflation goal.
Future Forecasts
According to Investec Economics, a rate cut might not arrive until as late as June. By the end of 2024, they forecast a potential reduction to 4.5%—but only if you’re still waiting for the evidence of a long‑term, sustained decline in inflation.
So, if you’re tracking the Bank’s next move, keep an eye out for any concrete signs that cost‑of‑living pressures are easing. Until then, the base rate’s film is likely stuck on “hold.”
