On 22nd June 2023, the Bank of England Monetary Policy Committee announced the increase of base rate from 4.5% to 5% as an effort to continue tackling high inflation.
The Bank of England recently motioned to increase interest rates by 0.5%, meaning the current base rate is now 5%. This move brings borrowing costs to the highest level since 2008 with a 13th consecutive increase. The reason for this increase is simply because inflation rates are too high, with the Monetary Policy Committee (MPC) arguing that if rates don’t rise now, high inflation could stay with us for longer.
During the meeting, the MPC voted by a majority 7-2 to make the increase to base rate in a stubborn attempt to meet the 2% inflation target in a way that helps to sustain growth and employment. Current inflation figures sit at just below 9%, a slight decrease since the previous base rate increase back in May 2023.
The increase in base rate influences other rates in the UK, including rates for loans, mortgages or savings accounts. Those who have a mortgage or loan will most likely notice payments may go up. However, those with savings accounts may see a higher return.
The MPC will continue to closely monitor indications of persistent inflationary pressures in the economy as a whole. The base rate will be reviewed again on Thursday 3rd August 2023, where the Bank of England MPC will make the decision to increase or lower rates.
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