How could the BoE's Inflation Report affect your cash?
Published 10 August 2012 by Daniel Culpan
The latest Inflation Report from the Bank of England has revealed its latest predictions for the UK economy - and here we look at exactly how your finances could be affected.
The Bank of England's latest quarterly Inflation Report has brought mixed news when it comes to the nation's finances, and consumer watchdog Which? has taken a look at how the Bank's predictions could affect your money - both for better and worse.
The bad news is that the Bank has cut its growth predictions for the economy to zero - slashed from the 0.8% predicted back in May. Even though the UK has been in the grip of recession for four years, this is still big news, particularly as it could have a big impact on the jobs market and the government's borrowing requirements.
The cost of borrowing is also expected to stay high, relative to the base rate. Although interest rates are historically low, they have not fallen by the same proportion as the Bank of England's base rate (which is normally used to set consumer interest rates). The Bank's Governor, Sir Mervyn King, said it would be 'more counterproductive than beneficial' to lower interest rates.
Moreover, the ongoing Eurozone debt crisis could also put further pressure on the wider economy - and the knock-on effects could be felt closer to home as time goes on.
But it's not all gloomy news. The predicted zero growth for the economy should lower inflation, which will hopefully take some pressure off UK families who've been struggling to keep on top of even basic living costs in the current climate.
Having said that, if the Bank decides to inject more money into the economy through quantitative easing, it could lead to more downward pressure on pensions and other savings.