When will interest rates go down? Bank of England deputy hints at summer UK interest rate cut

The Bank of England's deputy governor, Ben Broadbent, has hinted at a possible interest rate cut this summer.

In a speech on Monday (20 May), he suggested that if the economy progresses as anticipated, borrowing costs may come down this summer.

Currently at a 16-year peak of 5.25%, the UK interest rate has been raised by the Bank of England's Monetary Policy Committee (MPC) over the last couple of years to combat inflation.

However, CPI (Consumer Prices Index) inflation dropped to 3.2% in March compared to the previous year and is expected to approach the 2% target rate in the upcoming months.

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Broadbent emphasised the importance for the MPC, consisting of nine members who vote on interest rate changes, to closely monitor the evolving trends in wage and services inflation.

He added: “Whatever the priors of its individual members the MPC will continue to learn from the incoming data and, if things continue to evolve with its forecasts – forecasts that suggest policy will have to become less restrictive at some point – then it’s possible the bank rate could be cut some time over the summer.”

Broadbent will be replaced in his role by Clare Lombardelli, chief economist for the Organisation for Economic Co-operation and Development (OECD), on 1 July.

He will vote for the final time during the interest rates decision in June, with another vote set to take place in August.

Earlier this month, Mr Broadbent was among those to vote for interest rates to remain at 5.25%, with a 7-2 vote in favour of no change. The financial markets have priced in a reduction to interest rates by August.

For the average consumer, a potential interest rate cut by the Bank of England signals a possible decrease in borrowing costs, which could impact various aspects of personal finance, including mortgages, loans and credit card interest rates, making borrowing cheaper.