The Bank of England has voted for the second time to hold the base rate at 5.25% in response to the recent slight fall in inflation.

The Monetary Policy Committee voted 6-3 to hold the rates at 5.25% (the same decision as last meeting) thus putting an end to the frequent rate rises we have seen in the past year.

Recently we learned that inflation has fallen slightly to 6.7% which has given the Bank of England confidence to not rise the Base Rate again.

Of course, inflation is considerably above the 2% target set by the Bank and for this reason the base rate is still uncomfortably high.

The Bank of England raises the base rate to control demand within the economy as an higher interest rate increases the cost of borrowing and incentivises saving therefore reducing consumer spending therefore reducing prices through the subsequent fall in demand.

The Bank of England predicts that inflation will continue to fall this year and next with the 2% target being reached in the fourth quarter of 2025 however the question remains how high interest rates will be until then.