Positive outlook predicted by UEA experts ahead of interest rate reveal
The Bank of England will announce new interest rates for the next quarter
Last updated 21st Sep 2023
Economic experts are predicting a positive turn for the UK economy ahead of the Bank of England's decision on interest rates.
The Bank of England has been consistently raising interest rates throughout 2022 and into 2023 as the cost-of-living crisis worsened.
Currently, interest rates have been set by the Bank at 5.25%, meaning that those paying a mortgage have to pay 5.25% on top of their normal mortgage payments.
The reasoning behind the skyrocketing interest rates was so that the Bank could try to keep control of the rate of inflation - or the rate at which prices rise.
The rate of inflation in the UK currently stands at 6.7%, well above the government's target of 2%.
But despite the high rates that mean the cost of living continues to rise, there is hope that interest rates could go down for the first time in over a year.
Dr James Watson, Associate Professor in Financial Economics at the University of East Anglia, believed that signs could be pointing in the direction of rates falling.
"Financial markets expected the figure for the year that ended in August to creep up a bit because we've had an increase in global energy prices," he said.
"It turns out that UK that UK inflation on all of the important measures that the Bank of England will be looking at had ticked down somewhat. So there is some good news".
"But I think we can all be more reassured that we really are coming to the end of this month after month after month of interest rates going higher and higher and higher.
"Maybe we will be at 5.25% as we are now and stay there for a bit. That's sort of my thinking today. So focus on the good news".
It comes as the rate of inflation went down by 0.1% to 6.7% for July. While this might seem like a negligible figure, it shows the cost of prices is slowing.
Dr Watson explained that as a result, interest rates could plateau due to the slowing cost of price rises, which will provide a welcome boost to those paying loans and mortgages.
"I mean, when the Bank of England is increasing interest rates, it's doing that first and foremost and certainly for the last year or so to tackle the inflation. How is that working - It's on some level, discouraging people from borrowing," he said.
"For example, fixed rate mortgages are the one that's in the news all the time. The rate on fixed rate mortgages is just simply much higher than it was 15 months ago and that's a direct consequence of the Bank of England increasing interest rates".
The Bank is set to give its monthly assessment on interest on Thursday (September 21st), and whilst no dramatic decrease is expected, Dr Watson told people to start to see a downward trend.
"I think it's tough for people. I think we all know that and it's gonna be tough for a while to come.
"But I do think inflation continues to track down -and all the expectations are that inflation will continue to go down - it will be helping people.
"So I'm not saying it's going to be easy, but I do feel we're at something of a turning point. Inflation tracking down could mean interest rates not looking likely to go up much further at all - even if they do stay at the current level for some time".
The Bank of England will publish its monthly review of the economy at midday on Thursday.