Bank of England holds rates, as inflation worries rise

Laura Suter
1 August 2019

“Hot on the heels of the Fed’s decision to cut rates and amid ongoing talk of No Deal Brexit, it was very unlikely the Bank of England was going to shift rates today. The 9-0 vote in favour of keeping rates the same shows the MPC are united, with continuing concerns about the effects of Brexit on the UK economy and wider global growth,” says Laura Suter, personal finance analyst at AJ Bell.

“The story on inflation is quite different. Having previously expected current higher levels of inflation to tail off towards the end of the year, the pound’s recent fall in value means inflation is likely to rear its head again, presenting a new headache for policymakers. The Bank’s Inflation report signalled that interest rate expectations have fallen, with markets now expecting rates to be 0.5% by the end of 2021, a sharp dialling down from the 1% predicted in May. The committee left the door open to all possibilities depending on the outcome of Brexit, saying movements could be ‘in either direction’.

“The combination of continuing low interest rates and the prospect of another spike in inflation will be dispiriting news for anyone holding cash, as many have been getting below-inflation returns on their accounts for years. Investors need to fix their money for a year just to match the current 2% inflation rate, or tie it up for 18 months to beat the rate. Those struggling to get higher returns should look to high interest current accounts or regular savings accounts paying up to 5%.”

Laura Suter
Personal Finance Analyst
Laura Suter is personal finance analyst at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.
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