Savers will shrug at the lack of movement from the Bank of England on today’s decisions to leave the rate unchanged, but an August rise is firmly on the cards.
The Bank’s Monetary Policy Committee (MPC) decided six to three in favour of maintaining bank rate at 0.5%. This will, again, be met with frustration from savers, but give mortgage borrowers more time to lock in a deal, as most experts agree a rate rise is coming in August.
Ben Brettell, senior economist at Hargreaves Lansdown, describes the proceedings as “something of a non-event,” but adds: “There was a small element of surprise in the voting, with the Bank’s chief economist, Andy Haldane, joining Michael Saunders and perma-hawk Ian McCafferty in calling for an immediate rate rise. Economists had expected a 7-2 split, but in the event a forecast uptick in inflation was enough to split the committee 6-3.”
With this surprise hawkishness from certain members, Ed Monk, associate director for Personal Investing at Fidelity International, adds: “The Bank of England does, however, appear to be standing firm on its desire to hike rates in August, even in the wake of recent weaker than expected economic data. After abandoning its widely signalled rate hike in May, Mark Carney is determined to shake off the moniker of the ‘unreliable boyfriend’ if he can.
“A majority of economists expect a rise in August and there was nothing in the Bank’s comment today to dissuade them. A tightening of the MPC vote to 6-3 indicates the hawkish direction. The Bank said that it expects the dip in GDP growth to be temporary, meaning its central case of gradual tightening from here remains in place.
Nancy Curtin, chief investment officer at Close Brothers Asset Management, adds: “An interest rate hike was off the table before the MPC sat down today. Until the Bank of England is comfortable that the economic picture looks more resilient, they are unlikely to pave the way for future increases. As it stands, while wage growth has improved, the inflation outlook offers little support for a hike.