As of last week, August 1st, 2024, The Bank of England (BoE) reduced the base interest rate to 5%, the lowest it’s been since 2020. The 0.25% cut will impact things such as mortgages and savings rates, but by just how much, time will only tell.
Why have interest rates been higher?
The BoE implemented high interest rates to slow the rate of inflation and price rises. Reducing the demand for goods and services helps to slow inflation rates. This strategy works as the inflation rate stayed at 2% for May and June this year. This cannot be said for all goods and services as prices of some things continue to rise. If high demand continues then expect to see high inflation rates once again.
Putting this period of high inflation behind us would be ideal for the economy, but the Bank of England must be careful with how they cut rates. All we can hope for is low and stable inflation going in the future.
