What's going on?

The Bank of England (BoE) struck a cautious tone on Thursday as it lowered its growth expectations for both the UK economy and inflation in 2018.

What does this mean?

As recently as a month ago, investors were primed for an interest rate hike this week. But cautious comments from the central bank coupled with economic data suggesting the UK�s growth wasn�t rocking and rolling as hoped (the government blames the �Beast from the East�, although the BoE disagrees) did their work.


By Thursday, investors had all but given up on an increase. And the BoE obliged, keeping interest rates at 0.5% while saying it expects the UK economy to grow by 1.4% in 2018 � down from February�s forecast of 1.8%.

Why should I care?

For markets: The BoE is looking for signs of a recovery in the UK economy.

The Bank blames a slow first quarter for the lower growth estimate, and wants to see more before increasing rates further � perhaps suggesting a more gradual upwards path than previously expected, as in the US. The pound�s plunge in the wake of the Brexit vote made UK goods cheaper abroad � likely increasing demand � and made UK imports more expensive, causing higher prices at home. A strong pound this year has helped reverse that effect, leading price rises to slow more quickly than expected � and the BoE to lower its inflation expectations for the year.

For you personally: There�s more to interest than money in the bank.

In addition to paying you more on your savings, rising interest rates are typically a good thing because they signal strong economic growth. When demand for products rises as companies and people have more money to spend, it can drive a virtuous cycle � consumers spend more with companies which produce said in-demand products, and those companies turn profits that they can spend on things like new products and hires.