Bank of England raises interest rates in response to failing to control inflation
The UK economy is currently facing a series of challenges, with inflation rates remaining high and interest rates on the rise. According to the latest figures from the Office of National Statistics (ONS), inflation in England stands at 8.7%, a figure that has not been seen since 1992.
Core inflation, which affects energy and food costs, has risen to 7.1%, its highest rate since 1992. This increase has been attributed to a variety of factors, including rising prices for second-hand cars, live music events, and video games. Additionally, prices for air travel, recreational and cultural goods have also contributed to the high inflation rates.
Financial markets are betting that the Bank of England (BoE) will increase interest rates today by at least a quarter-point from the current level of 4.5%. The BoE, which manages monetary policy including setting interest rates to control inflation, has already pushed through 12 consecutive rate hikes since December 2021, with the rates now at 5%, the highest in 15 years.
The BoE's aim is to reduce the inflation rate in the future, but the latest inflation figures are higher than the Bank's reassurances that 2023 will see inflation fall quickly. The Institute for Fiscal Studies thinktank predicts that almost 1.4m mortgage holders could see 20% of their disposable income erased by the surge in borrowing costs, as the average two-year fixed rate deal for mortgages has risen to 6.19%.
SMEs (organisations with fewer than 250 employees) are advised to review their existing lending structures to keep ahead of the economic challenges. Douglas Grant, Group CEO at Manx Financial Group PLC, warned that ongoing rising costs continue to bring challenges for businesses.
Charles White Thomson, CEO at Saxo UK, commented that the UK is in an "economic danger zone" and losing the war against inflation. Alex Livingstone, Head of Trading & FX at Titan Asset Management, stated that the Bank of England raised rates by 0.5%.
The global banking sector is showing signs of weakness, which could exacerbate the economic challenges faced by the UK. K. Mitch Hodge and Nick Pampoukidis are the photographers for the images in this article.
Falling prices for petrol provided the most help towards the downward trend in inflation rates, but it seems that the UK still has a long road ahead in its battle against inflation.
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