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Interest rates now unlikely to rise in May

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27/04/2018
The likelihood of a Bank Base Rate increase in May has rapidly diminished thanks to the latest economic data, according to analysts.
Interest rates now unlikely to rise in May
The UK Bank Base Rate, set by the Bank of England, is likely to remain at its current historic low of 0.5% next month, in light of the country reporting the weakest economic growth figures for five years in the first quarter of 2018.
This will be welcome news for mortgage borrowers with Base Rate tracker mortgages, who had been anticipating a hike in monthly repayments.
Gross Domestic Product (GDP)  grew by just 0.1% in Q1 2018, thanks to a dip in construction and manufacturing.
The GDP data was ‘worse than feared’, according to Ben Brettell, senior economist at Hargreaves Lansdown.

He said: “The news casts further doubt over a May interest rate rise. As recently as last week markets were pricing in a near 90% chance that the Bank of England would raise rates next month, but this fell to more like 50% after comments from Mark Carney suggested potential ‘softer’ economic data and continued uncertainty over Brexit meant policymakers weren’t wedded to a May hike. Today the market’s saying there’s just a 25% chance that rates will move in May.”

Analysts are now split over when and whether interest rates will move this year, with some predicting hikes of 0.25% in August and October, others one increase at some point in the Autumn and others forecasting that we will end the year with the current Bank Base Rate still pegged at 0.5%.

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