Interest rates - latest: Bank of England criticised for ‘overly cautious’ rates decision

Reacting to today’s decision by the Bank of England’s Monetary Policy Committee Carsten Jung, senior economist at IPPR, said:

“Inflation is coming down more quickly than many predicted just a few months ago. This is largely due to global supply chains recovering and energy costs falling. But also domestic price pressures are falling quicker than the Bank had anticipated.

“All this shows the Bank of England tightened the screws too much, which is squeezing much needed future growth. The Bank should thus cut rates more quickly than its current plans. The tightening stance by both the Chancellor and the Bank of England contribute to the UK’s growth falling far behind the USA’s fast recovery.”

Responding to the Bank of England’s decision to keep interest rates at 5.25%, Liberal Democrat Treasury spokesperson Sarah Olney MP said:“This is cold comfort for millions of homeowners who still face massive hikes in their mortgage bills after Liz Truss crashed the economy.

“Many families still face a mortgage cliff edge despite this news. Liz Truss’s disastrous mini-budget and the Conservative party’s economic vandalism has put intolerable pressure on people’s finances.

“This Conservative government has no good story to tell on the economy.

“The only way to break this cycle of stagnation and financial hardship is to kick this out of touch government out of office. Rishi Sunak needs to stop his desperate attempt to cling on to power and call an election.”

Stephen Gomez, specialist mortgage adviser at Wesleyan Financial Services, said: “Another ‘hold’ decision is unlikely to lead to any drastic changes in the mortgage market.

“However, taken together with yesterday’s data confirming that inflation is slowing, it may help soften some of its current volatility – we’re still seeing some lenders increasing rates.

“The Bank of England is expected to start cutting rates sometime in the coming months.

“But for now, people remortgaging and borrowing for the first time will almost inevitably have to accept higher rates than they could get two or five years ago. It’s really important that they time to review all possible deals to make sure that whatever they’re going for is the best option for their specific circumstances.”

Rishi Sunak has full confidence in the Bank of England’s governor Andrew Bailey following the decision to leave interest rates unchanged.

The prime minister’s official spokesperson said: “Interest rates are rightly a decision for the independent Bank of England.

“As I said earlier, with inflation dropping to 3.4%, real wages rising, mortgage rates starting to fall, there’s clear sign that the economy has turned a corner after the shocks of the last few years.”

Asked whether the prime minister had confidence in the governor, he replied: “Completely”.

Rent prices in the UK have seen a record annual rise from last year, according to new statistics.

On average renters across the country are now paying 9 per cent more, with large regional variations.

This is the highest annual percentage change since the start of rental data tracking in 2015, the Office for National Statistics (ONS) has said.

David Cheadle, chief operating officer at National Debtline, said: “High interest rates are impacting more and more families each month, as mortgage payers come to the end of fixed rate deals meaning their monthly payments increase significantly. Renters are also being impacted as higher costs are passed on by landlords.

“Despite this week’s welcome drop in inflation, the pressure on household budgets is set to continue and we can unfortunately expect many more to fall into arrears.

“Anyone struggling to keep up with mortgage repayments should reach out to your lender. Lenders can do more to help than people often think, so it’s important to get in touch. And anyone worried about their finances can always speak to an adviser at National Debtline, who can work through all the options available.”

Suren Thiru, Economics Director at ICAEW, said: “While interest rates staying on hold again was expected, the more dovish vote split and meeting minutes suggest that rate setters are opening the door for rate cuts later this year.

“Though this interest rate hiking cycle is firmly in the rear-view mirror, the long delay between tightening policy and its impact on the wider economy means that the heavy toll of 14 rate rises has yet to fully crystalise.

“The Bank of England remains overly cautious on the prospect of rate cuts given the startling inflation slowdown and an economy in recession, increasing the risk they prolong our economic struggles by keeping policy too tight for too long.

“With inflation on track to drop back to the Bank’s 2% target in April, an interest rate cut by August looks a distinct possibility.”

Suren Thiru, economics director at ICAEW, said: “While interest rates staying on hold again was expected, the more dovish vote split and meeting minutes suggest that rate setters are opening the door for rate cuts later this year.

“Though this interest rate hiking cycle is firmly in the rear-view mirror, the long delay between tightening policy and its impact on the wider economy means that the heavy toll of 14 rate rises has yet to fully crystalise.

“The Bank of England remains overly cautious on the prospect of rate cuts given the startling inflation slowdown and an economy in recession, increasing the risk they prolong our economic struggles by keeping policy too tight for too long.”