The first interest rate cut in more than four years will take place next week, according to a poll of economists.
The survey, conducted by the Reuters news agency, showed the vast majority expected the Bank of England to cut interest rates at their August meeting.
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If the prediction proves to be correct, borrowing will become cheaper as the central bank-controlled interest rate will be dropped to 5%.
The figure is currently at a more than 15-year high of 5.25%, after 14 consecutive hikes.
Over 80% of economists, 49 of 60, in the 18-24 July poll said the Bank would make the cut.
Differing opinion
There is no uniform consensus, however.
Markets are less certain. A very small majority (54%) are braced for rates to be held, while the minority (46%) have priced in a cut.
Even an earlier Reuters poll was slightly less categoric. Before the latest inflation data was released, a June poll had been more convinced of an upcoming rate reduction, with 97% of those surveyed anticipating a cut.
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Lloyds Banking Group chief executive Charlie Nunn said the era of ultra low interest rates is over.
In months gone by, markets and economists had held opposite positions, with market participants betting on a cut and economists forecasting a hold.
Elsewhere, the effect of forthcoming lower rates can be seen. One of the biggest mortgage lenders Nationwide announced it was offering a less than 4% five-year fixed-rate mortgage deal.
The interest rate was last cut in March 2020, according to the Bank of England’s database – around the same time COVID broke out across the UK.
Why is borrowing so expensive?
Interest rates were brought up by the Bank in an attempt to reduce inflation.
It planned to bring inflation down to 2%. But while inflation has reached this low over the last two months, the Bank has kept rates at 5.25%.
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