Posted: Thu 21st Sep 2023
The Bank of England has kept interest rates at 5.25%, which brings to an end the 14 consecutive rises since December 2021.
The decision to keep rates as they are follows an unexpected fall in inflation in August. It decreased to 6.7% from 6.8% in July. Bank of England experts had forecast it would increase to 7%.
The Bank has been raising the base rate in an effort to tackle the UK's high inflation.
The aim is reduce the amount of spending by households and encourage firms to not raise prices. The downside is that the cost of borrowing finance goes up and businesses struggle due to a reduction in sales.
Members of the Monetary Policy Committee voted by 5-4 to keep rates at 5.25%.
Daniel Woolf, Enterprise Nation head of policy and government relations, said:
“The Bank of England's decision to hold on raising interest rates is welcome news for small businesses. Increasing interest rates means higher borrowing costs for SMEs, who often rely on loans and credit lines to fund their operations and growth, and reduced consumer spending, hitting their profit margins.
"Small businesses will also be encouraged by recent news that inflation and core inflation is falling, keeping the Bank of England’s target to halve it by the end of the year in sight.
"Coupled with average wages beginning to outpace inflation, small businesses are keeping their fingers crossed that today’s decision signals the beginning of the reversal in this year’s trend of increasing interest rates before long.
"In the meantime, small companies need a stable environment to regain confidence and all the support available to navigate the upcoming challenges to recover."
Commenting on the decision, chancellor Jeremy Hunt said:
"We are starting to see the tide turn against high inflation, but we will continue to do what we can to help households struggling with mortgage payments."
Bank of England governor Andrew Bailey signalled that the run of rates rises isn’t necessarily over. He said:
"There is no room for complacency. We need to be sure inflation returns to normal and we continue to take the decisions necessary to do just that."