On Thursday, Andrew Bailey, governor of the Bank of England, announced interest rate cuts in the UK from 5.25% to 5%.The UK’ss interest rate trim marks the first notable change in the nation’s monetary policy since the pandemic in 2020. The UK’s lower inflation served as the push towards the cut in interest rates, according to bank governor Andrew Bailey. Bailey cautioned policymakers to ensure “inflation stays low and be careful not to cut interest rates too quickly or by too much.”.
In the recent past, the Bank of England has grappled with surging inflation in the nation, forcing them to maintain higher interest rates. This monetary tug of war has placed extraordinary pressure on households; however, savers have reported favorable returns. The UK’s timely interest cut rates are expected to benefit homeowners on tracker mortgages and variable mortgages. However, the majority of homeowners are on fixed-rate mortgages, which are likely to soar when these deals expire in the following years.
The UK government hopes to restore the nation’s dampened consumer confidence. Altering one monetary instrument will inevitably impact corresponding instruments. According to the Bank of England, the UK hit 2% inflation in May and has remained stable since. Additionally, the Bank has spotted wage growths in 2024, which could aggravate inflation.
