WBG responds to Bank of England’s decision to cut interest rates to 5%

Responding to today’s interest rate decision by the Bank of England, Dr Sara Reis, Deputy Director at the Women’s Budget Group, said,

“After holding it at 5.25% since August last year, it’s good news that the Bank of England has today decided to cut the interest rate to 5%, particularly for those in debt. However, this is only a small relief, as rates remain at historically high levels. 14 consecutive increases, coupled with the failure of the previous government to properly invest in our economy when it was most critical, have caused serious harm to people’s living standards already strained by the spiraling cost of living.

“Although inflation has now come down to the Bank of England’s 2% target, it does not mean the cost of living crisis is over. Prices are 25% higher than they were two years ago, average private rents in the UK increased by 8.6% in the year to June 2024 ¹ , and wages and benefits have not kept pace. High interest rates have also pushed up mortgage costs, adding extra pressures for families with a mortgage and deepening the crisis of housing affordability ² .

“People up and down the country, low-income households in particular, continue to struggle to make ends meet and increasingly resorting to debt to afford life’s essentials. According to Citizen’s Advice, the number of people in a negative budget, when essential expenditure exceeds income, has more than doubled since 2020-21, now affecting 5 million people.

“Since the beginning of the cost of living crisis, we have stressed again and again that relying solely on the blunt tool of interest rate hikes to tame inflationary pressures is a misguided approach – especially when these are primarily driven by supply-side factors. We have warned that it will inevitably hurt ordinary people and risks deepening gender inequality. The combination of women having less bargaining power in the labour market, fewer savings and more debt, means that high interest rates are likely to have a disproportionately negative impact on women.

“Interventions by the Bank of England are not ‘market neutral’; they affect different groups in different ways. As with any other public body, the Bank of England is bound by the Public Sector Equality Duty to have due regard to equality, including gender equality, in its decisions. It should therefore conduct an Equality Impact Assessment, identifying the impact of its decisions on gender equality and other inequalities based on class, race and disability.”

-ENDS-

WBG spokespeople available, contact press@wbg.org.uk