Fall in UK Inflation Rate Gives Direction to Those with Housing Concerns
The recent data released by the Office of National Statistics regarding the fall in inflation rate is helpful to those wondering about the fate of the base rate, and ultimately interest rates. This information is necessary to making wise decisions about the timing of an important decision like remortgaging or buying that first home. The inflation rate recently dropped from 4.5% in May to 4.3% in June. The drop was quite unexpected for those within the housing market.
The goal of the inflation rate for the Bank of England is 2.0%. The rate has remained above the Bank’s goal for a total of 18 months. Even though an increasing amount of pressure has been applied from a variety of sources to raise the interest rate, the Central Bank has stayed the course. It continues to be the belief of the Bank’s Governor, Sir Mervyn King, that a rise in the rate now would cause an almost certain recurrence of recession-like trends. This could prove to be fatal to many parts of the recovering economy.
The Central Bank’s deputy governor, Charlie Bean, is a firm believer that interest rates should primarily be used to fight inflation and not place a cap on emerging bubble markets.
Many believe the base rate will remain at the historic 0.5% level for several months, at least into the first months of next year.
CPI or Consumer Price Index fell 0.1% for the first time since 2003. CPI is unrelated to the housing market, as it includes things like toys, computer games and other leisure items.