The Bank of England has decided to maintain the UK’s interest rate at 4.25% in response to escalating food prices and potential oil price hikes that could exacerbate living costs.
Since August of the previous year, the Monetary Policy Committee (MPC) has consistently lowered rates at alternate meetings, reducing them from a high of 5.25%. This strategy was feasible amid a gradual decline in UK inflation from its 2023 peak during the cost-of-living crisis.
Interest rates are employed by the bank as a mechanism to curb inflation, aligning with its mandate to stabilize the Consumer Prices Index (CPI) at 2%. Despite this, the surge in food prices has recently exerted upward pressure on overall inflation.
The latest statistics from the Office for National Statistics (ONS) reveal a 4.4% increase in food and non-alcoholic beverage prices over the year leading up to May, marking the steepest incline in over a year. Products such as ice cream, coffee, cheese, and meat saw notable price jumps last month.
In May, the overall CPI reported a 3.4% rise, exceeding economists’ forecasts of a 3.3% increase.
