Bank of England hikes rates as it predicts 13% inflation and long recession
Base rate raised by 0.5 percentage points to 1.75%, as Bank says inflation will hit 13% in October.
Vladimir Putin’s invasion of Ukraine has left Britain on course for a recession lasting more than a year and inflation above 13%, the Bank of England has warned as it raised interest rates for a sixth successive time.
Threadneedle Street said it had no choice but to increase borrowing costs by 0.5 percentage points to 1.75%, blaming Russia for cost of living pressures not seen in more than four decades and a 5% drop in living standards straddling this year and next – the biggest since records began in the 1960s.
Andrew Bailey, the Bank’s governor, said “there is an economic cost to the war”, as he predicted the economy was on course for a period of stagflation – a recession combined with a soaring cost of living.
While accepting the biggest increase in interest rates in 27 years would cause pain, particularly to the least well-off, Bailey said the Bank needed to take action to prevent spiralling price rises from becoming ingrained. Read more from The Guardian article >
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The Chancellor said with rising energy costs, it was now more important for homeowners to make sure their homes were as energy efficient as possible.
The platform saw a record 1.4m mortgage searches in January, which included 1m searches for standard residential mortgages. This is the first time this figure has topped the 1m mark in a calendar month.
The Bank of England (BoE) has made no secret that it is weighing up a base rate rise early next year and, coupled with chancellor Rishi Sunak referring to the Office for Budget Responsibility forecasting 4% inflation next year, an end to this period of ultra-low rates could well seem inevitable.
Figures released today from the Association of British Insurers and Group Risk Development show that a huge £6.2 billion has been paid out in life insurance, income protection and critical illness during 2020. This is the equivalent of £17 million per day, up 8% from 2019. This is also the highest combined figure on record.
