Independent Mortgages Direct NE

Base Rate Held At 5.25% As Inflation Falls To 3.4%

Bank of England

Base Rate: 5.25%

Inflation: 3.4%

Average House Price: £285,000

Bank Of England MPC - Why They Are Wrong

It’s a glaring disgrace that the Bank of England’s Monetary Policy Committee (MPC) has voted 8-1 to turn a blind eye to the genuine financial struggles facing the public despite a noticeable drop in inflation. With inflation falling from 6.7% to 3.4%, it would have been fair to expect the MPC to respond with a reduction in the Base Rate, offering some relief to individuals grappling with mounting financial pressures.

In August 2023, the Bank of England’s Monetary Policy Committee (MPC) raised the base rate to 5.25% when CPI inflation was at 6.7%. However, despite inflation falling to 3.4% afterwards, the MPC has not lowered the base rate. The growing difference between inflation and the base rate causing financial pain in several ways:

  1. Reduced Real Incomes: People’s real incomes effectively decrease, leading to a lower standard of living.

  2. Increased Borrowing Costs: Higher interest rates make borrowing more expensive. 

  3. Housing Affordability: Higher interest rates dampen demand by slowing down the housing market.

The widening gap between inflation and interest rates poses real challenges for individuals and households, impacting their purchasing power, borrowing costs, and overall financial well-being. The failure to adjust the Base Rate in line with falling inflation rates underscores a detachment from the everyday realities of ordinary people. For countless households already grappling with escalating living expenses, the refusal to lower interest rates feels like a slap in the face. It’s a testament to a system that prioritises the interests of financial institutions over the well-being of the people it serves limiting consumer spending and hindering economic growth. The MPC risks exacerbating inequality and deepening the chasm between the financial elite and the struggling masses by neglecting to provide much-needed relief through interest rate adjustments.

It’s high time for the MPC to acknowledge its duty to the public and take meaningful steps to alleviate financial pressure by reducing the Base Rate. 

Follow The US Federal Reserve

The decision to hold the UK Base Rate again aligns the UK with yesterday’s decision made by the US Federal Reserve (Fed). This puppet-like behaviour erodes confidence in the MPC’s ability to act in the best interests of the British public. It calls into question the transparency and accountability of our monetary policymaking process, leaving us to wonder who truly holds the reins of economic decision-making.

For More Information