The bank predicts that the budget’s £70 billion spending package will boost economic growth but also increase inflation, keeping it above the 2% target for longer than previously expected.

At its meeting on 6 November 2024, the bank’s monetary policy committee (MPC) voted by a majority of eight to one to reduce bank rate to 4.75%. One member preferred to maintain bank rate at 5%.

Kevin Brown, savings specialist at Scottish Friendly, comments on the Monetary Policy Committee’s rate decision today: “As was widely expected the Monetary Policy Committee (MPC) has cut its base rate, despite some significant potential headwinds for the UK economy, which threaten to reignite the spectre of inflation hanging over the economy.

“These headwinds come in the form of a big spending UK Government Budget and a US election result that looks set to be hugely consequential for the global economy and inflation expectations.”

Mr Brown continued: “Households will take some comfort that debt costs are getting a bit cheaper, but this should be taken with a pinch of salt as signals widely seem to suggest we might soon have renewed bouts of inflation.

“The MPC look likely to take a more cautious approach moving forward, as rate setters attempt to navigate the fine line between economic growth and inflation.

“Amidst all this, the message for households here is that having a rainy-day fund is still essential where possible. Beyond that, interest rate expectations are still falling which means long-term savings are providing ever-diminishing returns.”