So, wages are up, inflation’s cooled off, and the Bank of England’s next big decision is just around the corner. Sounds like good news, right? Well, maybe. It depends who you ask. Let’s take a look at what’s going on with the economy right now, and more importantly, what it might mean for your finances.

Wait… Aren’t Higher Wages Supposed to Be a Win?

Yep – on paper, at least. The latest figures from the Office for National Statistics show wages (excluding bonuses) are up by 5.9%. Factor in inflation, and real wages are still growing – by about 2.1% between December 2024 and February 2025.

That’s not nothing. After years of wage stagnation and a cost-of-living crisis that battered most of our budgets, it feels like workers are finally getting a bit of breathing room.

But before we start celebrating, there’s a catch: if wages rise too fast, it can push prices back up again. If everyone has more money to spend, businesses can start charging more. It’s a delicate balance. The Bank of England knows this too – which is why wage growth is always under a microscope.

Inflation’s Settling Down… Sort Of

Here’s where things get a bit brighter. The latest Consumer Prices Index (CPI) figure came in at 2.6% – bang on the Bank’s target. That’s a big shift from the eye-watering levels we saw in 2022 and 2023.

And here’s the key bit: core inflation – which strips out stuff like energy and food – has fallen to 3.4%. Still higher than we’d like, but better than where we were. And if core inflation keeps trending down, the Bank will feel more confident about cutting rates without accidentally kicking prices back up.

So far, so good. But there’s still that little voice in the back of the room whispering: “Yeah, but what about the rest of the economy?”

All Eyes on 8 May

That’s when the Bank of England’s Monetary Policy Committee next meets to set interest rates. Their main job? Keeping inflation close to 2%.

Right now, inflation’s on track, and wages are rising. But there are storm clouds on the horizon. Global issues – think sluggish growth in Europe, geopolitical tensions, trade spats – could weigh on the UK economy in the months ahead.

The Bank has to weigh all of this. If they cut rates too soon, inflation might come back. Wait too long, and they risk strangling growth.

Markets are betting on cuts – maybe four of them this year, bringing the base rate down to around 3.5%. But markets get things wrong all the time. (Just ask anyone who bought a tracker mortgage based on “expert predictions” last year…)

What the Mortgage Market Is Telling Us

Now this is interesting. Mortgage providers are already getting stuck into a bit of a rate-cutting war. Big and small lenders alike are offering deals below 4% – which is lower than the Bank’s current base rate.

How does that work? Lenders don’t just react to the Bank’s rate – they also look at something called ‘swap rates’ (basically what banks think interest rates will be in future). And those are pointing downwards.

So even before the Bank makes its move, lenders are already banking on cheaper money ahead. If you’re hunting for a mortgage or remortgaging this year, that’s great news.

So… What Should You Actually Do?

If you’ve made it this far, you’re probably thinking: “That’s all lovely, but what does this mean for me?”

Here’s the simple version:

• If you’ve got a mortgage – Keep an eye on rates. Some decent deals are starting to appear again. But don’t rush – locking in at 4% might feel smart today, but it could look steep in six months.
• If you’ve got savings – Those higher interest rates we’ve enjoyed might not last. You might want to look at fixing a decent rate before they start sliding.
• If you’re investing – Don’t panic. The Bank’s trying to steer the ship, not sink it. Short-term bumps will happen, but long-term plans matter more.
• If you’re just trying to make ends meet – Hang in there. Wages are going up and inflation is calming down. It’s slow progress, but it’s still progress.

The main thing? Don’t let headlines send you spiralling. Rates might go down. They might not. The important bit is having a plan that doesn’t fall apart every time the Bank sneezes.

And if you’re not sure what to do with your money? Get advice. A quick chat with a proper financial adviser can save you a lot of stress down the line.

The bottom line: The economy’s in better shape than it was, but we’re not out of the woods yet. The Bank of England’s next move could make a big difference – but whatever happens, there are ways to make it work for you.