No Changes To Base Rate, But Promising News?

As largely expected, the Bank of England has decided against reducing the base rate this month. Although May inflation shows the 2% target having been met, sustain seems to be the most accurate gauge of any reduction looking forward.

Household goods and food are contributors to a year-on-year decrease in inflation, whilst services inflation remains slightly higher than the Bank of England would like. A sustained inflation figure will also be more desirable for the BoE due to energy bills increasing this autumn.

Current predictions are that energy prices will go up by 12% from October. The Bank of England will likely be baking this into calculations moving forward and how this will impact inflation towards the end of the year.

Andrew Bailey, governor at the Bank of England, has said previously that the Bank only needs to be convinced that target inflation is sustainable in order to cut rates. June inflation data will be available by the next meeting, with predictions for July as well. This will also be post general election, giving the markets an opportunity to react to any incoming government.

If August does come too soon for a reduction in rates, eyes will be fixed to September with opinion having moved from if rates will be reduced to when.