Biggest increase since 1995 - Bank of England hikes interest rates up to 1.75%

The Bank of England has decided to raise the base interest rate from 1.25% to 1.75%, the biggest rate hike for 27 years.

In a move that had been widely predicted, the Bank plumped for a 50 basis point rise in a further move to try and get inflation under control.

It was the largest increase since the Bank was given independence by Gordon Brown in 1997. The decision takes UK interest rates to a 13-year high of 1.75%,  as many economists and experts had forecasted would be the case, and represents the sixth straight interest rate rise in a row.

In the worst outlook for the economy since the 2008 banking crash, the central bank said the UK would enter recession in the final quarter of this year, but raised interest rates to 1.75% in an attempt to tackle soaring inflation. It was the biggest jump in borrowing costs in 27 years.

Bank officials said a rise in the energy price cap to an expected £3,500 in October would be the main reason for the jump in inflation – currently at 9.4% – though the continuing supply chain disruption hitting global trade was another major factor in pushing up prices.

Eight of the Bank’s nine-strong monetary policy committee (MPC) voted for the 0.5% rise in interest rates, leaving the former LSE economist Silvana Tenreyro the only member to support a smaller 0.25% increase.

The MPC said inflationary pressures in the UK and the rest of Europe had intensified significantly since the Bank’s last review in May, largely reflecting “a near doubling in wholesale gas prices since May, owing to Russia’s restriction of gas supplies to Europe and the risk of further curbs”.

Households will have seen their energy bills triple in a year after the price cap on is increased again in October. Ofgem will announce the cap at the end of this month and there has been speculation that it will rise above £3,000 before increasing to £3,600 in January.

SOURCE:
Estate Agent Today
The Guardian