Bank of England raises interest rates to 0.75% as cost of living crisis deepens

It is the third time in more than three years that the Bank of England has raised the interest rate, which was at an all-time high during much of the coronavirus pandemic

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Bank of England interest rate hike discussed by Halligan

The Bank of England raised interest rates by 0.5% to 0.75% today to curb runaway inflation which is eating away at consumers’ money.

The Bank’s nine-member Monetary Policy Committee (MPC) voted eight to one in favor of raising interest rates from 0.5% to 0.75%.

The central bank said the only minority member – Jon Cunliffe – voted to keep rates at 0.5%.

It’s the third time in more than three years that the central bank has hiked the interest rate, which was at an all-time high for much of the pandemic.

Check out our guide to what rising interest rates mean for you, here.

In a statement, Threadneedle Street warned that the conflict in Ukraine could see households under pressure hit by double-digit inflation later this year.

Within minutes of the latest decision, the Bank signaled that further rate hikes may be needed as it laid bare a gloomy inflation outlook, with the consumer price index now expected to hit around 8% in the second trimester.







He said the hit from soaring energy costs to household finances – and the ripple effect on economic activity – is likely to be greater than initially feared.
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He said that if wholesale energy prices continue to soar, inflation in the UK could rise further by the end of the year and potentially be “several percentage points” than the peak of 7.25% expected last month.

The Bank said: “The effects of Russia’s invasion of Ukraine would likely accentuate both the spike in inflation and the negative impact on activity by intensifying pressure on household incomes.”

He said the hit from soaring energy costs to household finances – and the ripple effect on economic activity – is expected to be greater than initially feared.







The Bank of England raised rates to 0.75% this morning
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But he stressed that the shock to the economy from energy prices and Russia’s invasion of Ukraine is “something that monetary policy could not prevent”.

He said this month’s rate hike was “justified” with growth proving stronger than expected in January despite the Omicron variant of the coronavirus, and the Bank now expects an expansion of around 0.75% in the first quarter, up from previous expectations for gross domestic product. (GDP) to remain stable.

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The job market has also held up well and is not expected to weaken as quickly as expected, he added.

The rate hike comes after the U.S. Federal Reserve on Wednesday raised interest rates in America for the first time since 2018 in a bid to curb runaway inflation.

The Bank of England has now hiked rates three times since last December, marking the first time the base rate has been raised in three consecutive meetings since 2004.

Unite General Secretary Sharon Graham said: “Today’s interest rate hike comes at a time when millions of working people are facing the worst cost of living crisis in generations, now aggravated by the tragedy unfolding in Ukraine.

“This hike will put even more pressure on household finances as inflation and energy bills continue to soar.

“My message is clear, workers should not be made to pay for this. To all the bosses who think the answer to rising costs is to dip into the pockets of workers, please take note: we will defend jobs , wages and conditions of our members with the handle and will demand wage increases that keep pace with the cost of living.”

Les Cameron, financial expert at M&G Wealth, said: “It remains to be seen whether this rise will translate into higher rates available to savers or an increase in borrowing costs.

“With the high levels of inflation we are currently experiencing, a modest increase in savings rates would still mean that most cash or near-cash savers, for example National Savings & Investments, would see their wealth eroded in terms of real. Of course, many of those with cash savings are retirees who spend a higher proportion of their savings on energy costs, which we know are rising at a much higher rate even than overall inflation rates. .

“The rising cost of living, as evidenced by the recently announced 54% increase in average energy bills, will mean that those paying down debt that is not fixed rate will undoubtedly feel the pinch even more if rates go up.

“With higher inflation and potentially higher borrowing costs, reviewing your finances to ensure you are prepared for the future has never been more important and for many this will mean looking for a form of professional financial advice.”

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Leslie M. Gill