In light of the Bank of England holding the base interest rate, Dr Maria Paola Rana, Lecturer in Economics and Finance here at the University of Salford, shares her thoughts.
“As largely anticipated, the Bank of England (BoE) has kept the base interest rate at 4.75%. This is despite the most recent further cuts by the Federal Reserve and the European Central Bank (ECB).
“The news for the UK does not come as a surprise, considering the fact the inflation rate, at 2.6%, has increased for two consecutive months and is above the Bank’s 2% target. Additionally, the growth in wages has been faster than expected, and there is uncertainty following the budget, in addition to geopolitical uncertainty, and concerns around Trump and his anticipated trade policies.
“The BoE has taken the widely expected approach of ‘let’s wait and see.’ In November, after the second cut in four years, Andrew Bailey, Governor of the BoE, had also clearly anticipated that, even if the path for interest rates is likely to be “downward from here,” the process would be gradual.
“While there’s no early Christmas presents for mortgagors, borrowers and businesses on this occasion, we should expect the BoE to gradually decrease the base interest rate in 2025, by the end of which the inflation rate is anticipated to be closer to the 2% target. Another good reason to look forward to the new year.”