Base Rate Held - 4.75%
The Bank of England’s Monetary Policy Committee (MPC) has decided to keep the Bank Rate steady at 4.75%. However, the vote was split, with six members supporting the hold and three advocating for a 0.25% reduction to 4.5%. This divergence highlights differing views on the current economic landscape.
The decision aligns with market expectations as inflation continues to rise. The Consumer Price Index (CPI) inflation increased from 1.7% in September to 2.6% in November, indicating persistent upward pressure on prices. By maintaining the rate, the MPC aims to balance controlling inflation with supporting economic stability.
The Bank of England’s base rate, now at 4.75%, has returned to levels last seen before the 2008 credit crunch. For over a decade, interest rates were kept artificially low—near zero in some cases—to stimulate the economy during a slow growth and recovery period. While beneficial for borrowers, these low rates made controlling inflation difficult.
With rates at a more historically “normal” level, the Bank of England has regained a critical tool to manage inflation. Adjusting the base rate allows the Bank to influence borrowing, saving, and spending across the economy. Raising rates can cool demand and curb inflation while lowering them can stimulate growth during economic downturns.
Base Rate History From 2000
Swap Rates Rise As Financial Markets React
Swap rates have risen over the past week following the latest inflation figures, which showed an unexpected increase to 2.6%. This suggests that inflation remains a concern, leading to speculation that the Bank of England may keep interest rates higher for longer. Swap rates, which influence mortgage costs, have adjusted as lenders prepare for the possibility of prolonged higher rates into the New Year.
19th December Swaps
13th December Swaps
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