Bank of England Holds Base Rate at 4%
The Bank of England has decided to keep the base rate steady at 4%. This decision impacts borrowers and savers, as the base rate influences the cost of borrowing and the returns on savings.
Role of the Base Rate
The base rate is the interest rate the central bank charges other banks and lenders when they borrow money. It is a key tool used to manage inflation, aiming to keep price rises under control.
Inflation Target and Current Figures
The Bank’s inflation target, set by the Government, is 2% based on the Consumer Prices Index (CPI). The latest CPI inflation rate was 3.8% for the 12 months ending September, unchanged from August but still above the target.
Monetary Policy Committee (MPC) Vote
- Five members voted to keep the base rate at 4%.
- Four members voted to reduce the rate to 3.75%.
The MPC noted that “the risk from greater inflation persistence has become less pronounced recently, and the risk to medium-term inflation from weaker demand more apparent. But more evidence is needed on both.”
Expert Commentary
Nicholas Mendes of broker John Charcol said, “The Bank of England has chosen patience. Inflation is falling faster than expected, wage growth easing, and the labour market clearly softening.”
Impact on Mortgages and Savings
With the base rate held, mortgage costs and savings returns may remain stable for the time being, though future changes depend on how inflation and economic conditions evolve.
Author’s summary: The Bank of England is cautiously maintaining the base rate at 4%, reflecting a balance between easing inflation pressures and economic uncertainty, affecting borrowers and savers alike.