When will interest rates fall?

This guide to interest rates is updated each week or as markets move. If you sign up to our Pulse alerts, you'll be the first to know when forecasts move.

The Bank of England held interest rates for the seventh time in a row in June. The Monetary Policy Committee (MPC) voted by a majority of 7-2 to maintain rates at 5.25% (20 June). Two members preferred to reduce the Bank Rate by 0.25 percentage points, to 5%.

Andrew Bailey, the Bank’s governor, said: “It’s good news that inflation has returned to our 2% target. We need to be sure that inflation will stay low and that’s why we’ve decided to hold rates at 5.25% for now.”

Inflation, as per the Consumer Prices Index, fell to 2% in May and held at that level in June. Analysts had expected a fall in June to 1.9% and so the chances of a rate cut in August receded, according to markets. September now looks more likely.

The next central bank meeting is scheduled for 1 August followed by meetings on:

• 19 September
•  7 November
• 19 December

What are the latest forecasts?

Money markets indicate there is a less than 25% chance of the BoE cutting interest rates in August. It had been 50/50 before the inflation announcement on 17 July.

September is the most likely month for the first rate cut with one or two more priced in by the end of the year, taking the Bank Rate to 4.75% or 4.5%.

The Bank is more likely to keep rates high when it believes inflation or wages are rising too quickly, hoping that pricier debt will slow down price and pay increases.

Recent wages data (on 18 July) had little impact on interest rate forecasts. As analysts predicted, wages grew at an annual pace of 5.7% in the three months to May, down from 6%. This remains a high level and will cause MPC members to pause for thought.

They will also be concerned with the level of inflation in the services sector, as opposed to goods, which continues to run higher than they would like. Inflation for the services sector, which accounts for 80% of the UK economy, remained unchanged at 5.7% in this latest data.

How forward market interest rates have changed

The latest yield curve implies rates a notional rate of 4.59% by the end of 2025. In other words, rates will most likely have fallen to 4.5%. The Bank operates in quarter point changes.

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