Interest Rates Frozen: June 2024

Today the Bank of England announced that it would keep interest rates frozen for the seventh consecutive month, despite another decline in inflation. Official figures released on Wednesday indicated that the rate of price increases had dropped to 2%, hitting the Bank’s target, down from 2.3% in May.

Although prices are still rising across the country, the latest inflation figures show that the rate is much slower compared to recent years when households and businesses were heavily impacted by the cost crisis. In its meeting ending on 19 June 2024, the Monetary Policy Committee (MPC) voted 7–2 to maintain the Bank Rate at 5.25%. Two members preferred a reduction of the Bank Rate by 0.25 percentage points, to 5%.

The Bank Of England reported:

Twelve-month CPI inflation fell to 2.0% in May from 3.2% in March, close to the May Monetary Policy Report projection. Indicators of short-term inflation expectations have also continued to moderate, particularly for households. CPI inflation is expected to rise slightly in the second half of this year, as declines in energy prices last year fall out of the annual comparison.

UK GDP appears to have grown more strongly than expected during the first half of this year. Business surveys, however, remain consistent with a slower pace of underlying growth, of around ¼% per quarter.

Following the decline in inflation, the Confederation of British Industry (CBI) stated that conditions are now favourable for the Bank to cautiously lower interest rates in August.

Responding to the Bank of England’s latest decision, Federation of Small Businesses (FSB) national chair Martin McTague remarked: “Yet again, the MPC has opted to stick instead of twist, a move which was widely predicted but is nonetheless disappointing.”

Source: Bank Of England