Inflation on target
In May, inflation fell to 2% – which is exactly the Bank of England’s inflation ‘target’ – for the first time since July 2021. This was in part thanks to falling food inflation, with cost of food and drink falling in May. In fact, prices for bread, vegetables, and sugary treats decreased across the month, bringing the annual rate of food inflation down to its lowest level since October 2021 to 1.7%.
Base interest rate decision
In late June, the Bank of England met to set the base interest rate – one of the main levers it has to control inflation. As a reminder, the Bank of England raised interest rates very quickly last year to their highest levels in 15 years in order to try and control inflation. Higher interest rates generally reduce the money people and businesses have to spend, reducing the demand for goods and therefore lowering inflation. However, they can’t reduce demand so much that the economy goes into a deep recession.
Interest rates at 5.25% for the seventh time. While the inflation target has been hit, services inflation remained high at 5.75%, as well as wage inflation at 5.8%. Plus, a cut this close to the general election could be used politically and, in this pre-election period, the bank is extremely limited in the public activity it can be seen in.
The next interest rate decision is now set for 1st August. Traders put the odds of a cut at 50/50.
Good news for your savings
A high base rateThe interest rate that’s set by a country’s central bank. Commercial banks can sometimes use it to determine the interest rates they offer on their savings accounts and loans – including mortgages. is great news for your cash savings. With a Moneybox Simple Saver, you could earn 4.75% AER (variable) on your savings with a qualifying account*, and access your money when it suits you – with a maximum of one withdrawal every month.
*You will earn this reward rate if you either: have a balance above £0 in a qualifying Moneybox account, which includes: Cash ISA, StocksStocks, also known as shares or equities, represent units of ownership in a company. & Shares ISA, Lifetime ISA, Junior ISA, Personal Pension, or have a Reward Savings Account that hasn’t been cancelled. If your balance in your Lifetime ISA drops to £0 then you are eligible to keep the reward rate for 12 months or until 13/02/2025, whichever date is later.
Source: ONS, May 2024
