The Bank of England raised interest rates to 5.25% today, the highest level since 2008. This is the 14th consecutive interest rate rise, as the Bank of England tries to bring inflation under control.
Inflation in the UK is currently at a 40-year high of 9.1%, and the Bank of England believes that it needs to raise interest rates further in order to bring it down. The Bank expects inflation to peak at 11% in October, before starting to fall back.
The Bank’s decision to raise interest rates will have a number of implications for households and businesses. For homeowners with variable rate mortgages, their monthly payments will go up. This will be a particular burden for those who are already struggling to make ends meet.
Businesses will also face higher borrowing costs, which could lead to them raising prices or cutting jobs. This could further dampen economic growth.
The Bank of England is walking a tightrope with its interest rate policy. It needs to raise rates enough to bring inflation under control, but it also needs to avoid causing a recession. It is a difficult balancing act, and it remains to be seen whether the Bank will be successful.
In addition to raising interest rates, the Bank of England is also taking other steps to try to cool the economy. It has started to sell some of the bonds that it bought during the financial crisis, and it is expected to continue doing so in the coming months. This will help to reduce the amount of money in circulation, which should help to slow down economic growth.
The Bank of England is also warning businesses and households to prepare for a period of higher inflation and slower growth. It is likely that the cost of living will continue to rise in the coming months, and that economic growth will slow down. This will be a challenging time for many people, but the Bank of England believes that it is necessary to take these steps in order to bring inflation under control.
