The Monetary Policy Committee (MPC) has decided to keep the Bank of England base rate at 4.25% following its latest review last Thursday.
Their decision was not a great surprise. Inflation is currently standing at 3.4% for May, which is a slight drop since April but is still a significant high after reductions in the rate earlier this year. The MPC considers that inflation will now remain at this level for the rest of the year before falling back towards 2% next year.
The MPC also noted their concerns over a softening in the labour market and continued global economic uncertainty, referencing the recent escalation in the conflict in the Middle East.
What this means for your business:
- Borrowing costs remain steady for now. The MPC’s comments suggest that further rate cuts could be made later in the year and lenders may respond to that by dropping their rates, even in advance of any future cut.
- No change for returns on savings. You should review any cash reserves you hold to ensure they’re earning interest.
- The inflation figures suggest that costs remain a concern, and this is likely to remain the case for the rest of the year. So, it could be important to plan conservatively for the coming months.
The Bank continues to take gradual, cautious steps when it comes to interest rates. If you’d like to review your funding or cash flow strategy, we’re happy to help.
Enterprises that pay business rates are being encouraged to check their current property valuation and make sure the details held by the Valuation Office Agency (VOA) are correct.
The latest Business Confidence Monitor, an Institute of Chartered Accountants in England and Wales survey, shows confidence continuing to fall. Confidence has now fallen for six consecutive quarters and is now at its lowest since the final three months of 2022.
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