Displaying items by tag: interest rates rise

The Bank of England has raised interest rates to 1.75%, the biggest rise in 25 years, as it predicts an even higher peak in inflation of 13%. It fears inflationary pressures are becoming ‘more persistent and broadening’. Many companies have been successfully raising prices which will push up consumer costs in the shops. The latest rise in gas prices has led to another significant deterioration in the financial outlook as the UK is now projected to enter recession. The bank has forecast that the UK economy will start shrinking in the fourth quarter of this year, and then keep contracting through next year. That would be the longest recession since after the 2008 financial crisis. The bank also points to the UK’s ‘tight’ labour market - a signal that it is worried about a wage-price spiral, as workers seek pay rises to help with the worst cost of living crisis in decades.

On 17 March Interest rates rose again for the third time in four months to counter higher prices and calm the rise in the cost of living. It means interest rates are now at their highest level since March 2020, when the Covid pandemic began. Energy bills and food costs are increasing and there is concern the war in Ukraine will push prices up further. Inflation, the rate at which prices rise, is currently 5.5%, well above the Bank of England's 2% target. The Bank expects inflation to reach 8%, possibly higher, in coming months, and cited rising prices and strong employment as the reasons for the latest rise. About two million households will see an immediate increase of about £26 a month to a typical tracker mortgage, and £16 to a typical standard variable rate mortgage.