As our recent inflation article stated, last week the markets were pricing in a 75% chance that the base rate would be cut today, however, various economic surveys were released at the end of last week which indicated a sharp recovery in sentiment and economic activity since the General Election. By this morning there was a 50/50 chance of a rate cut, but luckily the Monetary Policy Committee (MPC) has seen sense, in what was the last meeting for the departing Bank of England Governor, Mark Carney.
There were however still two persistent members from the nine, Michael Saunders and Jonathan Haskel, who continue to vote for a base rate cut, so it’s not off the table.
The Bank stated that
In 2019 the UK economy slowed because firms’ uncertainties about Brexit reduced their spending, and growth in the world economy slowed. UK inflation fell back below our 2% target.
The latest data suggest that the uncertainty facing businesses has fallen, and that global growth has stabilised. We expect uncertainty to fall further and global growth to pick up. If that happens, it should help to support growth here in the UK.
If that does not happen, then we may need to lower interest rates to support UK growth and ensure that we return inflation to our 2% target sustainably.
If the economy develops as we expect, then upward pressure on prices should build gradually over the next few years. In that case, we think a modest increase in interest rates may be needed to keep inflation at our 2% target.
In Savings Champion’s opinion, it was the right decision today, although savers are already suffering and have been for years. To have cut interest rates today would have seen providers add to the already shocking number of rate cuts that have happened over the last year and a half, even though the base rate has remained at 0.75%.
Since August 2018 (when the base rate was increased to 0.75%), there have been over 1,000 cuts to existing variable savings accounts.
Unfortunately, today’s reprieve is unlikely to keep savers immune from further cuts to their savings accounts.
Savers need to take matters into their own hands and find the very best rates available to earn as much interest as they can on their hard-earned savings. Leaving money to languish in a high street bank is the worst thing you can do as they pay some of the worst rates available.
For example, HSBC and Lloyds are paying just 0.10% on their easy access accounts, whereas Marcus is paying 1.35% AER. On a balance of £50,000 that is the difference of earning either £50 gross per year, or £675 – but with the same access. So, you can make your cash work much harder, simply by actively managing it!
Take a look at our Best Buy tables to find the best account for your needs.