The next base rate cut could be months away if inflation rises over consecutive months

Interest rates expert view: "The next base rate cut could be months away if inflation rises over consecutive months."”

 
Katie Horne, savings expert at Flagstone, comments on inflation, borrowing rates, and post-ISA-season savings rates ahead of this Thursday’s base rate vote:

It’s startling to take in the predictions some economists are making about how the Iran conflict could push inflation higher again. These predictions and ongoing market instability undermine the expectations we had just days ago that the Bank of England might cut the base rate from 3.75% on 19 March. 

Geopolitics move quickly, but the impact they have on global inflation figures take longer to even out later. If inflation rises over the coming weeks, the likelihood of any cut to the base rate in the next quarter falls sharply. The next base rate cut could be months away if inflation rises over consecutive months.

Savings rates continue to perform strongly with many banks offering inflation-beating returns on instant access and fixed term accounts alike. 

It’s typical to see rates fall slightly in the weeks after the end of ISA season. But the downward trajectory that had been anticipated for the rest of the year is less likely now. 

With borrowing rates heading north again, fuel prices increasing, and the energy price cap expected to rise when it is reset this summer, consumers are understandably bracing for a choppy ride ahead. 

At times like these, proactively managing your money can pay off.

Savvy savers should explore laddered (or staggered) saving techniques. These techniques let them keep some savings handy in high interest instant access accounts, while making the rest work as hard as possible in fixed term accounts where competitive rates are guaranteed for longer.

If you have savings in high interest accounts and a mortgage to service, consider using the interest earned on those savings to overpay your mortgage. Even just upping your repayments by £70 a month on a 25-year, £260,000 mortgage can reduce the length of your term by as much as two years.