Interest rates – live: BoE to make decision after inflation higher than expected

If you missed it yesterday: UK inflation has held at a higher than expected rate after air fares and motor fuel dropped in price.

The Office for National Statistics said that its key measure of inflation, the consumer prices index, was 3.4 per cent in May – having also been 3.4 per cent after revised figures in April, its highest level for more than a year.

Inflation in the UK had been dropping, having reached a high of 11.1 per cent in October 2022. A rise for April was expected due to raised labour costs, rising energy bills and changes to social housing costs, among other factors. But the leap was above the expected figure and led Chancellor Rachel Reeves to acknowledge disappointment at the rise.

A drop in some areas for May will therefore be taken as a limited positive, though inflation remains some distance above the Bank of England’s government-mandated 2 per cent target.

While fuel dropped for May, food prices increased to the highest rate in 12 months, while household goods also went up.

Here’s a chart of how the interest rate has changed over the past few years.

The post-financial crash years were extremely low – cheap money for all, basically.

But a huge rise in inflation – through energy costs and more – from 2022 saw the rate pushed as high as 5.25 per cent, before now slowly decreasing again.

The base rate – currently at 4.25 per cent following cuts in February and May – impacts consumers and taxpayers through everything from their mortgages to savings, so what do experts foresee both next week and beyond?

The Bank of England’s MPC will be meeting and announcing their interest rates decision at 12 noon today.

The expectation is that they hold firm at 4.25 per cent, but there’s at least some case to be made for guidance on what comes next.

Oil prices rising and inflation sticking higher than expected are both reasons to keep the rate high – or even to raise it to 4.5 per cent again, in the eyes of some.

But slowing wage growth, unemployment rising and the economy all but flatlining are all key issues that the BoE must balance out as to when they can cut interest rates once more.

Good morning and welcome to The Independent’s live business news coverage for Thursday.

As usual we’ll bring you all the stock market reaction to the day and the big lines from the world of UK plc and beyond.

Our primary focus leading toward lunchtime, however, is the Bank of England’s meeting on interest rates.