Inflation has fallen substantially since the rates were increased, and in May, it hit the 2% target that the BoE was aiming for – the lowest rate in almost three years. In July, it was announced that this level had risen steadily, which is good news for those waiting for the first base rate cut.
However, other measures of inflation are taken into account when making a Base Rate decision. Some of these criteria remain higher than the Bank would like, and the Bank of England has also stated that they need to be sure that inflation will stay low now that it has hit its target. Otherwise, they risk cutting rates and will have to raise them again shortly afterwards.
According to the BBC, there are hints of an interest rate cut in August. For example, Bank deputy governor Ben Broadbent said in a speech that a rate cut at “some time” over the summer was “possible.”
Many economists forecast rates to be slashed in August, which means we could see a rate drop soon. Other more cautious forecasters believe September is more likely, but given the IMF’s recommendation that UK interest rates should fall to 3.5% by the end of 2025, rates should start dropping soon to ensure the health of the country’s economy.
The Bank of England meets several times a year to set the Base Rate, and it is decided by a vote of the nine members of the committee. At the last meeting, seven members voted to hold the rates, while two voted to cut rates. There were no votes to elevate the rate further, and some members are eager to cut rates. Commentators see this as a hint that members are starting to consider cutting rates in the near future. The next meeting will take place on 1st August.
