The Bank of England has decided to keep the base rate at 0.5%. The decision was made by the BoE’s Monetary Policy Committee following a very weak period for the British economy: GDP growth was just 0.1% for the first quarter of 2018, far short of the 0.4% target set in February.
Despite a weak first quarter, though, the MPC remains fairly confident in its longer-term forecasts for the UK economy – though the annual GDP target has now been revised down to 1.4% from 1.8%. While GDP growth was weak in the first quarter, inflation fell faster than expected and the unemployment rate has fallen.
As always, there’s still a big question mark hanging over the effects of Brexit. Following the MPC meeting today, BoE governor Mark Carney said that, “the economic outlook for the UK remains clouded by Brexit uncertainties. Despite the welcome agreement on a transition period, the terms on which the UK will trade with the EU beyond that period remain to be determined.”
With the base rate staying at 0.5%, interest rates on savings accounts and some mortgages (tracker and discounted) will likely remain unchanged for the time being. The MPC’s next base rate meeting is in June, and then again in August. After tumbling from 5.75% in 2007 to 0.25% in 2016, the base rate was finally increased from 0.25% to 0.5% in November 2017.
Carney continues to warn that the base rate will go up steadily over the next few years, but the exact timing of those hikes is being constantly revised. Some economists are now suggesting that the base rate might not go up again until 2019.
Now read our guide on preparing for a higher interest rate on your mortgage