The Bank of England (BoE) is set to release the new interest rate this week amid new figures that show inflation has failed to fall.
On Thursday, June 22, the BoE is expected to release the new rates at around noon. While it is not clear what decision the bank will make, they now face more pressure to increase the base rate in a drive to bring down inflation.
It comes after new figures from the ONS revealed that inflation has not changed, with the Consumer Prices Index remaining at 8.7 per cent in May - the same it was in April. This goes against the Bank's goal of dropping inflation and keeping it at 2 per cent.
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The main tool used by the Bank to bring down inflation is by raising the base rate. This increase would primarily be felt by mortgage-holders with a variable interest rate.
Such people could notice the cost of their repayments increase alongside the base rate. It's important to note that mortgage-holders with a fixed rate won't see any changes to their payment until after their fixed period ends.
Why does the Bank of England change interest rates?
The BoE raises interest rates to ensure that inflation is brought down. The Bank's Base Rate is factored by the country's economical situation and it is up to the Bank to decide what will bring down the rate of inflation over the next few years.
Will the Bank of England raise interest rates again?
In May, the base interest rate was hiked to 4.5 per cent by the bank’s Monetary Policy Committee (MPC). Rates have been increased 12 times in a row from 0.1 per cent in December 2021.
While there is always a chance the interest rate won't change, it seems this is unlikely due to the new inflation figures. Many experts were predicting inflation to fall in May, partly due to the Bank's hardline increases, however this is not the case.
Rob Morgan, chief investment analyst at Charles Stanley, said: “With prices showing little response to the Bank of England’s twelve successive interest rate rises, today’s figures seal a further increase in interest rates at the Monetary Policy Committee’s next meeting tomorrow from the current level of 4.5%. An increase to 4.75% is all but nailed on, but a shock-and-awe rise of 0.5% to 5% cannot be ruled out.
“The Bank of England will likely maintain tight policy for the remainder of the year, meaning further interest rate rises and no significant rate cuts until 2024.”
