Kevin Brown, savings specialist, comments on today’s interest rate cut to 4.25%

MPC signals above-target inflation only temporary

"A rate cut has looked like a sure thing since ‘Liberation Day’ in the US derailed the UK’s hopeful recovery. Inflation remains above target, and is expected to go higher still, but the Monetary Policy Committee appears relatively  confident that it is temporary. This was the fourth rate cut within 12 months.  

"The future path of interest rates, however, is less certain. The ongoing tariff situation adds an additional curve ball to the usual uncertainty about economic growth. The ultimate level of the tariffs applied to the UK remains unclear, as is their final impact on households and businesses alike. Tariffs could have an inflationary or deflationary effect.

"The domestic picture is also foggy. Wage growth remains high, which could drive inflation. ‘Awful April’ has seen a series of price hikes from the regulated utilities. On the other hand, pump prices are falling, making it cheaper for drivers to fill up.

"Mortgage holders have already reaped the benefits of the rate cut, which has been reflected in lower fixed rate mortgage costs. However, saving rates could still fall. It is always worth a re-examination of how you are building up your financial resilience – is the nest egg working as hard for you as it could be, especially after this latest rate cut if a chunk of it is in cash?"