Rates are increased by the Bank of England to 5%, the highest level since 2008.

The benchmark interest rate at the Bank of England was increased by 0.5 percentage points to 5%.

According to an official statement, the Monetary Policy Committee of the central bank approved the decision by an enormous margin.

The central bank has been fighting persistently rising inflation, therefore this was the 13th rate increase in a row since December 2021, raising the interest rate to its highest level since 2008.

The consumer price index (CPI) for the UK increased by 8.7% in the year ending in May, remaining constant from April. This is 0.3 percentage points more than the BoE’s May report predicted.

Both the Core CPI and services sector inflation reached their highest levels since March 1992 in the 12 months ending in May. The Core CPI, which excludes the cost of energy, food, alcohol, and tobacco goods, increased by 7.1% and 7.4%, respectively.

According to the BoE, the second-round impacts of external cost shocks on domestic price and wage trends are expected to take longer to reverse than they did to arise.

The BoE warned that additional tightening of monetary policy would be necessary if there were signs of more enduring pressures.

According to Richard Carter, head of interest rate research at financial service provider Quilter Cheviot, the BoE’s response to the most recent shock inflation reading was more harsh than anticipated.

According to official figures, the UK economy escaped recession at the beginning of this year by gaining 0.2% month over month in April and 0.1% over the prior three months.

But worries about the economic outlook have deepened as persistently high inflation raised pressure on the central bank to raise interest rates even more.

The shock of rising mortgage rates has already been felt in the UK home markets.

According to mortgage lender Halifax, the nation’s average home price dropped by 1% in May compared to the same month the previous year, marking the first yearly reduction since 2012.

According to the Institute for Fiscal Studies (IFS), more than 14 million persons aged 20 and over hold mortgages, with the average two-year fixed mortgage being at 6.01 percent, up from just 2.65 percent in March 2022.

According to the IFS, 1.4 million people in the UK could lose 20% of their disposable income as a result of interest rate increases.

Leave a Reply

Your email address will not be published. Required fields are marked *