Whilst this is good news for consumer confidence it would seem there are still opposing views over whether it will lead to a cut to interest rates tomorrow.
Inflation is a measure of the rise in price of goods and services over the last year. Because it had soared so high in recent times – to as much as 11.1% in November 2022 – the Bank of England (BoE) has been raising interest rates in a bid to bring it down.
The Monetary Policy Committee (MPC) at the BoE is due to to meet tomorrow to decide whether to keep interest rates at their current level of 5.25%, cut or increase them.
So, will the fact inflation has hit the target be enough to encourage the central bank’s decision makers into cutting interest rates?
It would seem opinions are divided.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, thought not. “Hitting the 2% inflation milestone will be a major moment for the BoE after a long, drawn-out battle to bring rampant inflation down from the double-digit levels seen just over a year ago,” she said.
“While the news will be comforting for households, it is unlikely to result in an immediate rate cut tomorrow as CPI services inflation has slowed but remains stubbornly high and core inflation, which strips out the more volatile items such as food, alcohol and tobacco, has eased but continues to sit above the 3% mark.”
Emma Jones, managing director at Whenthebanksaysno.co.uk, speaking via the Newspage Agency was more optimistic. “Well this is exciting news for a change,” she said. “Borrowers brace for action because news of a rate reduction now seems far more realistic than it did at the start of the year.
“Yes there’s far more that could interfere with a potential cut to Bank rate but homeowners need something to take the pressure off. Next stop 5%? If not now, then when?”
Katy Eatenton, mortgage & protection specialist at Lifetime Wealth Management, also speaking to Newspage, thought August was still the most likely date for the first base rate cut.
“Finally we reach the magical 2% inflation target,” she said. “Will it bring the end of the financial struggle borrowers have been subjected to?
“I’m still unconvinced it is enough to give us a rate reduction tomorrow, let alone save Sunak in time for the election. Borrowers and the broader property market will likely need to wait until August to hang out the bunting.”
