Interest rates are expected to be held at **3.75%** by the Bank of England, as uncertainty continues to dominate the UK and global economies.
Analysts widely predict the benchmark rate will remain unchanged, following strong signals from the Bank that it needs time to assess the impact of the Middle East conflict on the economy and the cost of living.
The base rate is the Bank’s primary tool for controlling inflation, which measures the annual rise in prices of goods and services.
While the rate of inflation remains above the **2% target, at 3.3%**, a cautious approach by the Bank of England’s rate-setting committee is anticipated.
“The repercussions of the [Iran] conflict are still keenly felt, and uncertainty about how the situation could evolve also remains high, which will be key points the Monetary Policy Committee (MPC) will have to consider,” stated Sandra Horsfield, economist for wealth management group Investec.
After the decision is announced at 12:00 BST, the MPC will also publish its first full monetary policy report and set of economic forecasts since the US-Israeli strikes on Iran began in late February.
The Bank is unlikely to offer any firm views on the future direction of interest rates.
Commentators also highlight significant uncertainty for the rest of the year, with some suggesting rate rises remain a possibility, while others believe no change is more probable.
Before the US-Israel attack on Iran, economists had expected both the inflation rate and interest rates to fall further this year.
The MPC’s decision impacts borrowers and savers, as well as the investment and hiring decisions of businesses.
For borrowers, the interest rate on a fixed mortgage does not change until the deal expires, typically after two or five years, when a new one is chosen.
**The average rate on a two-year fixed deal was 4.83% at the start of the conflict, rising to a peak of 5.90%**, according to financial information service Moneyfacts. This has now slightly dropped to 5.81%.
A host of lenders have announced cuts in the last 24 hours, but brokers caution that fixed rate rises in the coming weeks cannot be ruled out.
“The standard advice in uncertain economic times stands: secure a mortgage rate you think suits your circumstances or looks reasonable value for money as soon as you can, then try to switch to a cheaper deal with the lender before your mortgage is due to complete,” advised Aaron Strutt, from mortgage broker Trinity Financial.
Savers will also be closely monitoring the outcome of the MPC meeting.
Interest offered on half of UK savings accounts can beat **3.75%** – the current Bank of England benchmark rate – but it is usually those who have not switched provider for a long time who get the worst deal, according to Moneyfacts.
If prices rise sharply, the buying power of those savings diminishes, especially if the interest received on those savings is poor.
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