Interest Rates Freeze Gives Hope For Businesses & Consumers

Yesterday, Monday 25th March, the Bank of England’s monetary policy committee voted overwhelmingly, by 8 to 1, to freeze interest rates at the current level of 5.25%. Could this be a sign that we could actually see a cut to interest rates in the not too distant future?

We all know why interest rates have been hiked on 14 consecutive occasions over the last year or so. The Bank of England hope that by having high interest rates they curb spending and so bring down the level of inflation, which at one time was 11.1%. Inflation now seems to be coming down to more manageable levels, however there is always a risk that by raising interest rates they kill any growth in the economy which can lead to a recession. It is a fine balance like all economic policies.

There Are Encouraging Signs That Inflation Is Waning

Here is what the Bank of England governor Andrew Bailey said about the decision to freeze interest rates, as copied from an article on the Belfast Telegraph website:

“In recent weeks we’ve seen further encouraging signs that inflation is coming down.

“We’ve held rates again at 5.25% because we need to be sure that inflation will fall back to our 2% target and stay there.

“We’re not yet at the point where we can cut interest rates, but things are moving in the right direction.”

Nathan Emerson, chief executive of estate agents’ professional body Propertymark, is also quoted in the article, and he is very much hoping that interest rates will fall shortly. He said:

“Propertymark’s own housing insight report found that there has been a 120% increase in the number of potential buyers registered.

“So now that optimism and momentum is gaining in the market, we now need to see interest rates start to fall so that buyers’ affordability can further increase, (therefore) opening up the market and providing more options for those looking to move home.”

High Interest Rates Are Tough For Businesses & Consumers

When interest rates are high it is tough for businesses and consumers alike. Businesses find that the cost of borrowing can be quite prohibitive and it can stunt their progress. And consumers find their mortgage rates rise which affects their ability to spend, which affects retailers who find their takings greatly reduced. So we are crossing our fingers that interest rates will be reduced come the summer so we can all look forward to a more prosperous end to the year.