“It would have been a major surprise had Base Rate changed today. Key rate change stimuli has eased recently, in particular general inflation and house price inflation.
Since the last MPC meeting The Chancellor has confirmed that the newly adopted Consumer Price Index (CPI) is now the official inflation measure. The CPI is currently showing an annual increase of only 1.3%, with a target rate of 2%. This index fell last month and weak retail performance resulting in many pre Christmas sales will have a helpful impact on December’s figure.
Looking ahead the strength of sterling against the dollar will also help the inflation figures. Thus we see little reason for the Bank to implement the quarter point increase widely forecast for next month.”
What should borrowers do now?
“We believe that trackers and discounted deals continue to offer better value than fixed rates. This is because fixed rate pricing still reflects the City’s expectation that Base Rate will rise to 5% by early next year.”
“Those people who would prefer the security of fixed monthly payments, or are on a tight budget, should however shop around in order to find the cheaper fixed rate deals currently on the market.”
