What time is the Bank of England interest rate decision today? When base rate is announced and what to expect
UK interest rates are expected to rise again today, reaching their highest level since 2008.
According to economists and the financial markets, the Bank of England will raise the base rate for the 12th consecutive time, as inflation continues to soar.
UK Consumer Prices Index (CPI) inflation remained firmly in double digits in March, squeezing household budgets and proving more stubborn than expected.
What time is the interest rate announcement?
The Bank of England will announce the latest base interest rate at 12pm.
The Bank will also publish its quarterly monetary policy report, which set out the economic analysis and inflation projections that the Monetary Policy Committee uses to make its interest rate decisions.
What are interest rates?
Interest is what you pay for borrowing money, and what banks pay you for saving money with them.
Interest is shown as a percentage of the amount you borrow or save over a year. For example, if you put £100 into a savings account with a 1 per cent interest rate, you would have £101 a year later.
Individual banks and lenders can set their own interest rates, but the most important is the bank rate, set by the Bank of England’s Monetary Policy Committee.
The Bank explains: “It’s part of the monetary policy action we take to meet the target that the Government sets us to keep inflation low and stable.
“Bank rate determines the interest rate we pay to commercial banks that hold money with us. It influences the rates those banks charge people to borrow money or pay on their savings.”
When interest rates fall, it’s cheaper for households and businesses to increase the amount they borrow, but it’s less rewarding to save.
Conversely, rising interest rates tend to be bad for people borrowing – particularly those with mortgages – but can be good for savers if banks pass the increases on.
How much will interest rates increase?
Policymakers at the Bank of England are expected to raise interests from 4.25 per cent to 4.5 per cent, representing a 0.25 percentage point increase.
The Bank’s aim in elevating interest rates is to bring UK inflation down to its 2 per cent target.
Experts will be watching the Bank’s monetary policy report closely for its economic forecasts, and an indication on what the future holds for inflation and rates.
In February, when the last report was produced, the Bank said it expected inflation to fall sharply over the rest of the year.
But with the CPI remaining above double digits since then, the latest report will be examined for signs this forecast has changed.
Ellie Henderson, from Investec Economics, said the “clock is ticking” on the Bank’s monetary policy tightening cycle, and an increase on Thursday could be the last.
“As things stand, and considering the sharp downward influences on inflation in the coming months, namely from energy but also from cooling food and goods price inflation, we suspect that this could be the last hike by the Bank of England in this cycle,” she said.
However, there is still a “high chance” the Bank will decide to lift rates by 0.25 percentage points again in June, especially if inflation remains stubbornly above target, she added.
“What is clear is that the days of successive interest rate hikes in this economic cycle are limited, but the exact endpoint is clouded with uncertainties.”
Klaus Baader, global chief economist at French bank Société Générale, agreed that while a 0.25 percentage point is expected, “what is less certain is what it will do afterwards”.
He said it was likely that policymakers would no longer predict a recession, having previously anticipated the UK would dip into a short and shallow recession during the first quarter of the year.
The bank rate stood at 0.1 per cent in December 2021. Since then the Bank has increased rates 11 times in a row, in order to tackle price rises caused by the end of Covid restrictions, and then soaring energy costs as a result of Russia’s invasion of Ukraine.
The International Monetary Fund (IMF) has said the trend of rates increasing is likely to be temporary, with low productivity and ageing populations in rich economies such as Britain, France and Germany meaning that low inflation and weak growth will soon return, forcing central banks to cut interest rates.
The IMF’s latest modelling shows the UK’s natural rate of interest could fall to about 0.3 per cent by 2050.
