What's your reaction to the BoE's latest interest rate announcement?

To hold or not to hold, that is the question. At the moment, with the news of the GDP contraction in October, holding the base rate or a minor reduction feels the only option open to the Bank of England. Momentum in the mortgage market has started to pick up pace as confidence returned, with lenders all reducing rates and swap rates showing a consistent downwards trend. Things are on track for 2023 to end much more positively than it began, If the Bank of England had done anything other than hold or reduce rates the whole economy could be derailed.

As expected the rate was held, but wouldn’t it have been nice to see them drop it to 5%.
The government and MPC didn’t act quick enough to tackle inflation in the first place, and then when they did act, they did too much too quickly, and now we are heading towards a recession. For once they should try something different, you never know it might actually work!
We all know that inflation is dropping, despite Rishi and Jeremy claiming the benefit for something that was happening anyway. We also know that next year more than 1.4 million homeowners are going to be coming off low mortgage rates and onto higher ones. The base rate is expected to drop next year, so why prolong the pain of businesses and households any longer?

It is no surprise to see the Bank of England hold the base rate today, waiting to see the next couple of inflation results before the next review in February. Whilst there are plenty of reasons a rate reduction would have been more beneficial to the economy, the bank is taking a cautious approach to avoid inflation bouncing back up. If only they would have been as cautious and rational previously when needlessly increasing the base rate and strangling the economy.

The market fully expected the base rate to remain at 5.25% for the second consecutive time. All the indicators that the Bank of England look for have suggested that their actions have had the desired effect on inflation and curbed people's spending habits. There was no need to increase the Base Rate further, piling more pain onto businesses and mortgage holders would have been unnecessary in what has already been one of the most challenging years for many.

With this latest hold on the Base Rate, the market should continue the current downward trend and the rate war that we are currently seeing continues into 2024. With rates continuing to reduce along with inflation, this should help ease some of the burden that households have had to deal with in 2023 and make 2024 a more prosperous year.

"Whilst it was no surprise, it is still nonetheless disappointing that the Bank of England did not take the opportunity to spread some festive cheer with an early cut.

"Given the economic outlook, it seems that we will be going into the New Year with interest rates at a higher level than they need to be, and there is an increasing sense that a rate cut will need to happen sooner rather than later.

"Inflation is still on close watch, but with thousands more mortgage holders set to come off low fixes into a higher rate environment and wage growth starting to ease, the Bank could find themselves yet again behind the curve.

"The good news is that in recent weeks in the money markets, SWAP rates have started to fall markedly and mortgage lenders are entering 2024 in competitive mode, keen to hold on to their existing customers and attract more to increase or maintain their market shares.

The Bank of England seem schizophrenic on base rate. The day after the US showed the way, with expectations of three rate cuts next year, our central bank have three policy members voting for more rate hikes. Their own forecasts today state inflation will be much lower than expect next year, but also say they are going to keep rates higher for longer. The government needs to consider whether he’s the right person for this job, given then impact on households and businesses.

The Bank of England's decision to hold interest rates today following the US Fed's confirmation yesterday, affirms the position that central banks are done with rate rises. We see global markets race higher on the news on the premise that the next step is a rate-cut cycle. This will be on the back of slowing inflation data but also with one eye on the slow growth outlook in the economy. This will ultimately lead to rate cuts into 2024, probably during quarter 2.

Overall, the decision to hold rates at 5.25% reflects Threadneedle Street's balancing act between controlling inflation and supporting economic growth amidst global economic headwinds, which the Government have let play out all year. Now evidence supports the growing deceleration of the UK economy, with GDP growth slowing and consumer confidence at an all-time bucket low. However, some relief in the headwinds for homeowners could partially offset the impact of rising inflation with the potential for lower interest rates, compared to what we have seen over recent months. If this was a boxing match between the Bank Of England and The Government, the Bank Of England would likely have a slight advantage due to its so-called superior training and experience, unlike the Government whose objectives are mixed - The Government stand no chance of victory unless they can develop a strong strategy and stick with it - which some may argue them doing nothing is a strategy in itself.