Will the BoE hold or reduce interest rates today?

A leading panel of economists has urged the Bank of England to hold the base interest rate when it announces its decision today.

The Bank’s Monetary Policy Committee is expected to keep the rate at 5.25% again, with a chance it may recommend a cut next month.

In March, the committee froze the rate with an almost unanimous vote even though Inflation fell to its lowest level in more than two years at 3.4%, and later 3.2%.

Shifting opinions

The Times’ newspaper’s shadow monetary policy committee voted to keep the rate at 5.25% this week, the highest rate in 16 years.

Some members of the shadow committee chose a cut of 0.25%, but were out-voted by the majority.

In a sign that opinions among economists are shifting, it is the first time any members of the committee have opted for a rate reduction since the Bank started raising the rate in December 2021. One member even said the Bank should lift interest rate by 0.25% to accelerate the fall in inflation.

And another group of economists, this time organised by the Institute of Economic Affairs, has noted to reduce the base rate to 4.75%, arguing that the UK faces a period of weak growth or even recession if the Bank fails to cut rates aggressively.

Rising mortgage costs

This all set against a background of rising mortgage costs as the Bank has stuck to its policy of waiting for inflation to fall.

Late last month, a clutch of lenders including Barclays, HSBC, and NatWest, confirmed they would be increasing their lending rates, piling further pressure on home buyers and remortgagers.

And the latest tracker data from Rightmove shows mortgage rates going up, with the average 5-year fixed rate at 4.97% and two-year at 5.38%.