Bank of England leaves the base rate on hold after inflation jump

There were no surprises today as the Bank of England met for the first time this year to discuss rates. As anticipated, the Monetary Policy Committee (MPC) left the base rate unchanged at its current historically high level of 5.25%. This marks the fourth meeting in a row resulting in a ‘no change’ vote.

For the first time since the financial crisis in 2008, there was a three-way split on whether rates should rise or fall:

  • Six members voted in favour of holding at 5.25%
  • Two members voted to increase the rate to 5.5%
  • One member voted to reduce the rate to 5.0%

Governor of the Bank of England, Andrew Bailey, said:

"The MPC will continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including a range of measures of the underlying tightness of labour market conditions, wage growth and services price inflation.

"Monetary policy will need to be sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term, in line with the committee’s remit."


‘Stubborn’ inflation forces pause on decreases for now


The Bank’s latest decision comes after inflation in the UK rose unexpectedly in December, recording its first increase in ten months. According to the Office for National Statistics, consumer prices increased at an annual rate of 4% in December, compared to 3.9% in November.


The Bank said it now expects inflation to temporarily return to below 2% by the summer as energy prices fall.

Inflation is the steady rise in the prices of goods and services over time. It can reduce the purchasing power of your money. This means the money you have today might not be worth as much in the future.


Commenting on the MPC's decision, Simon Merchant, Co-Founder and CEO of Flagstone, said:

"Holding the base rate at 5.25% will surprise almost nobody. Stubborn inflation that sits at double that of its target of 2% put to bed any unfounded expectations that the MPC might move to cut rates now. Banks and building societies across the UK will need more economic data that points towards greater stability before they start to plan for rate reductions."


Flagstone's poll of savings professionals at more than 50 UK banks and building societies ahead of today's decision found that 95% of respondents did not expect any change to the base rate. The remaining 5% predicted a cut.


Merchant adds: "Inflation, stubborn though it may be, continues to create a buoyant time for consumers to rediscover the high-performance, low-risk savings options on offer and make their money work harder."


Take advantage of this savings sweet spot


Even though the base rate hasn't changed, it's important to highlight that it hasn't been this high since 2008. And at 5.25%, it continues to remain higher than the current inflation rate, which stands at 4.%. This gives you a chance to sign up to savings accounts that outpace inflation, a trend that hasn’t happened since May 2016.


Take a look at your current accounts. If your cash is sitting in an easy access account for convenience, you may not be seeing the return on your loyalty. This is an opportune time to look for alternative options that are offering more attractive rates.


At Flagstone, you get access to competitive and exclusive rates from 60 banks . High-interest savings rates not only help your money grow but also enable you to tame inflation by ensuring you're earning the highest possible returns.


Our cash deposit platform lets you view and manage your savings through one single account, making it more convenient to track balances, interest rates, and overall portfolio performance.


See how much you could earn on your savings with Flagstone’s cash deposit calculator.


This article is not advice. If you would like to receive advice on your savings and investments, consider speaking to a Financial Adviser.



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