Inflation has been a key factor influencing the UK's interest rates in the short to medium term.
In 2023, UK inflation experienced a significant acceleration, with the consumer price index (CPI) reaching its peak at 11.1% in October. Although it slowed down towards the end of the year, the CPI unexpectedly rose to 10.4% in February, driven by the increasing costs of food and non-alcoholic drinks. However, inflation has since moderated, reaching 10.1% in March. In its latest May Monetary Policy Report, the Bank of England (BoE) stated that it anticipates inflation to decline rapidly throughout 2023. The report mentioned a projected decrease to around 5% by the end of the year. While certain items, such as food, may continue to experience faster price increases, the recent decline in gas prices should lead to lower energy bills. The BoE expects inflation to continue declining and eventually meet its 2% target in late 2024. Regarding exchange rates, the British pound (GBP/USD) displayed sideways movement against the US dollar during the first two months of 2023, reflecting the influence of monetary policies of both the BoE and the US Federal Reserve. However, starting in March, the British currency has seen a slight appreciation, recording a year-to-date gain of over 4% as of May 12th. For a personalised review of your mortgage requirements to discuss the impact of inflation on you, please reach out to one of our expert mortgage brokers using the link https://www.mortgageladder.com/mortgageapply