The Bank of England voted by a majority of 7-2 to maintain interest rates at 0.50% on May 9th as it judged the costs of waiting for additional information on the extent to which the UK economy is developing to be modest given the fall in CPI inflation to 2.5% in March.
While expectations had formerly thought a second-rate hike likely in May, the timing of the next rate movement decreased sharply since mid-April against a backdrop of weaker-than-expected economic data as the UK economy began 2018 slowly.
The Bank of England’s Monetary Policy Committee sets Monetary Policy to maintain inflation for price stability around a 2% target in a way that helps to sustain employment and economic growth.
Economists had expected growth for the UK economy to be 0.3% higher than the preliminary estimate for GDP growth in the first quarter as poor weather late-February and into early-March was blamed as it depressed construction and retail activity.
Despite this, projections for economic activity remain positive with the UK economy expected to grow by 1.75% per year on average over the forecast period. Hiring intentions have continued strongly over the past three months, with the unemployment rate falling slightly further. A small margin of excess demand is expected to emerge by 2020 exerting upward pressure into higher rates of pay growth.
Savers had been hoping for a second rate hike as average savings rates have fallen behind inflation, negatively impacting the real value of savings.
Personal savers can earn up to 1.31% on instant access, while those saving for a house could earn up to 2.00% on instant access in the Holmesdale Building Society Home Saver account. For those looking over a fixed term period, personal savings rates hit 1.95% on 1 year, 2.16% on 2 year, 2.31% on 3 years, 2.52% on 4 years and 2.70% on 5 years.
Non-personal savers tend to hold their savings in shorter-term accounts such as instant access and notice accounts while data shows recently fixed term accounts being utilised up to a 1 to 2 year period. The best rates for non-personal savers are however considerably lower. The best corporate rate on instant access is 0.85% while corporates and charities looking for fixed terms can earn 1.86% on 1 year and 2.02% on a 2 year.
Cascade Cash Management tracks all savings rates from authorised deposit takers in the UK ranging from instant access up to five years. The company’s proprietary technology allows for depositors to spread their cash to gain full protection under the Financial Services Compensation Scheme too.
Dr Emma Black, managing director of Cascade Cash said:
“The move by the Bank of England to maintain the rate is news that a lot of us in the industry were expecting. Whilst from a savers point of view an increase would have been beneficial, to maintain the rate helps the UK stabilise while we wait to see the impact of inflation. Savers certainly won’t be losing anything and we will continue to offer the best possible rates through Cascade’s portal on a daily basis.”
For more information please visit www.cascade.co.uk