Bank of England expected to hold interest rates as inflation remains high

The Bank of England is anticipated to maintain its key interest rate at 4% amid persistent inflation, as policymakers balance economic growth with inflation control amidst a complex global economic landscape.

The Bank of England is widely expected to keep its key interest rate on hold at 4% when the Monetary Policy Committee (MPC) meets on Thursday. This follows the committee’s previous decision in August to cut the Bank rate from 4.25% to 4%, marking the lowest level in over two years. According to the BBC’s cost of living correspondent Kevin Peachey, the decision to maintain this rate will be announced at noon, after recent data showed that inflation in the UK remains stubbornly elevated, at 3.8% in August — nearly double the Bank’s 2% target. The ongoing high cost of food has been a primary driver behind this persistent inflation.

The Bank rate, which directly influences borrowing costs and savings returns, is the MPC’s principal tool for controlling inflation. Higher interest rates typically make borrowing more expensive, reducing consumer spending and slowing price rises. However, policymakers must balance this against the risk of harming the broader economy by discouraging investment and consumption. The August rate cut came after a rare split vote, highlighting the delicate balance faced by the MPC. Industry analysts now expect Thursday’s vote to be less contentious, with no change predicted due to inflation remaining above target.

While the MPC cut rates in August as a cautious move, they have held the rate steady in subsequent months, including through September, October, and November, with the rate recently raised again to 5.25% at different points earlier in 2023 before the cut. The Bank’s official minutes show the committee has underscored the need for monetary policy to remain restrictive “for a sufficiently long period” to ensure inflation returns sustainably to its target in the medium term. In November, the committee voted 6-3 to keep rates unchanged at 5.25%, despite some members favouring a further increase, reflecting concerns about loosening labour market conditions and softening economic activity.

Mortgage rates are influenced heavily by changes and expectations around the Bank rate, which means homeowners face uncertainty about borrowing costs. Although mortgage rates have dipped slightly since August, experts like Rachel Springall from Moneyfacts note this may be temporary, especially with inflation forecasts keeping pressure on the Bank to maintain higher rates. Additionally, the period of rate cuts has translated into lower returns for savers, with average easy access savings rates falling below 3%. Springall advises savers to review and potentially switch accounts to secure better rates on their deposits.

The UK’s inflation predicament is part of a broader, complex economic landscape. The Bank acknowledges that while there are signs inflation may begin to ease soon, the path remains precarious. Globally, central banks are managing similar challenges, balancing inflation control with safeguarding economic growth. The Bank of England’s cautious approach to keeping rates steady but historically high so far this autumn underlines its intent to avoid stoking inflation while guarding against economic downturn.

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Source: Noah Wire Services

Noah Fact Check Pro

The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.

Freshness check

Score:
8

Notes:
The narrative is current, discussing the Bank of England’s anticipated decision to hold the interest rate at 4% during the upcoming Monetary Policy Committee meeting. This aligns with recent reports from August 2024, indicating a consistent approach to monetary policy. The inclusion of recent inflation data and its impact on the decision adds freshness to the content. However, the article references past decisions and data, which may suggest some recycled content. The presence of a press release indicates a high freshness score, as such releases are typically timely and original. No significant discrepancies in figures, dates, or quotes were found. No evidence of republishing across low-quality sites or clickbait networks was identified. The narrative does not appear to be based on a press release.

Quotes check

Score:
9

Notes:
The direct quotes attributed to Kevin Peachey, the BBC’s cost of living correspondent, are unique to this narrative. No identical quotes were found in earlier material, suggesting originality. The wording of the quotes matches the context and content of the article, with no variations or discrepancies noted.

Source reliability

Score:
10

Notes:
The narrative originates from the BBC, a reputable and well-established news organisation known for its journalistic standards and credibility. This enhances the reliability of the information presented.

Plausability check

Score:
9

Notes:
The claims regarding the Bank of England’s expected decision to maintain the interest rate at 4% are plausible and consistent with recent economic indicators and monetary policy trends. The narrative provides specific details, such as the anticipated announcement time and the influence of inflation data, which are verifiable and align with known economic patterns. The language and tone are appropriate for the topic and region, with no inconsistencies or suspicious elements noted.

Overall assessment

Verdict (FAIL, OPEN, PASS): PASS

Confidence (LOW, MEDIUM, HIGH): HIGH

Summary:
The narrative is current, originating from a reputable source, and presents plausible and original content with unique quotes. No significant issues were identified in terms of freshness, originality, or potential disinformation.