Bank of England Predicts Gradual Decrease in Interest Rates Amid Economic Uncertainty

The Bank of England has maintained UK interest rates at 4.5%, citing increased uncertainty in global trade and the impact of US trade tariffs on international relations. Governor Andrew Bailey indicated that despite holding the rates steady, the Bank is optimistic about a gradual decline in rates, with two potential cuts forecast by year-end.

While inflation is stabilizing, currently at 3% above the Bank’s target, concerns remain for households facing rising living costs. About 600,000 homeowners with mortgages linked to the Bank’s rate won’t see immediate changes, but many with fixed-rate deals are anticipating higher payments once their agreements expire.

The article highlights that nearly 82% of mortgage holders are on fixed terms, while variables like trade tariffs are affecting UK businesses and contributing to hesitation in hiring and investment. Housing market pressure is evident, with homeowners like Louise Gibson expressing fears about impending repayment increases.

The Bank warned that inflation may slightly increase this year to around 3.7%, and it needs to be vigilant to balance interest rates, as higher rates could deter economic growth. The article discusses ongoing pressures from increasing household bills and the impact of policy decisions pertaining to National Insurance contributions. As the government strives for economic recovery, contrasting opinions surface regarding the effectiveness of current fiscal policies.