Bank of England increases interest rates for 11th time in a row
The Bank of England’s Monetary Policy Committee (MPC) met today, and the majority of its members voted for an eleventh consecutive increase, by 0.25% to 4.25%. The votes received were a majority of seven to two showing a resounding majority of members in favour of the rise.
Today’s increase has immediately followed the news yesterday that the rate of inflation has unexpectedly risen from 10.1% to 10.4%, which was expected to fall. The rise in inflation is a direct result of the increased prices of household goods and services, including energy prices, food, and non-alcoholic drinks.
Economists’ predictions have suggested that the Bank of England’s Monetary Policy Committee would freeze any further interest rate rises, as we have alluded to in our recent interest rate prediction articles. It was also suggested that there might be a 0.5% increase towards the middle of the year, which has clearly been brought forwards by the lack of downwards movement in the rates of inflation.
On a slightly more positive note, this is the first time in 8 months, since June 2020, that the increase has been less than 0.5%. It is still being suggested that the interest will peak at 4.5% in the summer this year.
Other global economies still follow a similar trajectory which could also have been an influencing factor on today’s change:
- US Federal Reserve suggested that it would increase its interest rates from 4.75% to 5%, making this the 9th consecutive increase for the US.
- European Central Bank also increased interest rates by 0.5% on its 3 major regions last week.
Recent research also suggests that many households in the UK are expecting further increases to their mortgage interest rates this year. This is also very likely to cause many people to experience debt or payment issues with their credit.
It has already been suggested that inflation rates would drop extremely sharply to approximately 2.9%, which would undoubtedly have a knock-on effect on consumers ability to access to credit. This is likely to cause the decision makers to place a hold on any further interest rate increases to aid the recovery of the British economy.