(PA Wire)
The Bank of England is expected to raise interest rates by up to 0.5 percent today in a bid to curb runaway inflation. The finances of millions of Britons could take another hit if the bank announces its biggest rate rise since 1995. Nine members of the Monetary Policy Committee will vote on whether to raise the bank’s key interest rate by 0.25 percent or 0.5 percent. Either way, the mortgage would be more expensive. It comes as economists fear a recession caused by “stagflation” – slow growth, high unemployment and inflation. The Resolution Foundation think tank has warned that next year inflation could reach an “astronomical” record high of 15 per cent – the highest level since 1980. This will see commodity prices rise much faster than wages, while the UK faces a winter of yet more record highs in gas and electricity prices fueled by Russia’s invasion of Ukraine. Low- to middle-income families are likely to face disproportionately higher levels of living costs for the foreseeable future, the think tank said. Show latest update 1659609992
The International Monetary Fund last week cut its outlook for global economic growth, citing higher-than-expected inflation, ongoing Covid-19 outbreaks in China and further fallout from the war in Ukraine. The UK economy is likely to expand just 0.5 percent next year, the slowest growth rate among the world’s advanced economies, the IMF said. The landscape is particularly complicated for central banks because many of the factors driving inflation are beyond their control, particularly food and energy prices that have soared due to uncertainty surrounding Russia’s invasion. But these external pressures are now being embedded in the UK economy, with public and private sector workers demanding pay rises to prevent inflation eroding their living standards. “This explains why at the last MPC meeting we adopted language that made it clear that if we see signs of more persistent inflation and that price and wage setting would be such signs, we will have to act strongly,” Mr Bailey said at the latest his speech. month. “Simply put, that means a 50 basis point hike will be among the options on the table at the next meeting.” Thomas Kingsley4 August 2022 11:46 1659608527
Raising interest rates “will not solve the cost of living crisis”, warns the expert
Rising interest rates will not solve the cost of living crisis, a financial commentator has warned. Grace Blakeley told Good Morning Britain: “This inflation is not mainly driven by demand, it’s driven by cost pressures, supply chain pressures, rising energy prices – it’s a similar situation to what we saw in the 1970s when you had the two increases in the price of oil. “This drives inflation throughout the economy, because petrochemical fuels are involved in everything, not just transportation of goods, not just energy production, but so many goods. “Therefore, raising interest rates is not going to help anything, it will make the situation worse.” Thomas Kingsley4 August 2022 11:22 1659606246
When is today’s Bank of England announcement?
The Bank of England (BoE) is expected to announce its biggest rate hike in almost 30 years on Thursday as the UK continues to struggle with rising inflation. The central bank’s Monetary Policy Committee (MPC) has already raised interest rates five times this year, overseeing an increase from 0.1 percent in December 2021 to 1.25 percent in June, as it tries to put the brakes on runaway inflation – currently at 40 – a year high of 9.4 percent. It is now expected to raise them further to 1.75%, with a Reuters poll published earlier this week saying 70% of 65 economists surveyed expected that to happen today. The Bank of England will announce its decision at a press conference from 12 noon on Thursday 4 August, with governor Andrew Bailey speaking from 12.30. Read the full story below:
When is the Bank of England interest rate announcement today?
The Monetary Policy Committee is likely to take further steps to curb inflation Thomas Kingsley4 August 2022 10:44 1659605087
Will rising interest rates cause a housing market crash?
Mortgage payments are rising following successive rate hikes by the Bank of England and further increases expected in the coming months. The Bank is seeking to contain inflation which is set to reach 15% by early 2023 – the highest in four decades. Ultra-low interest rates have made mortgages cheaper, inflating a housing bubble that has made homeownership a distant dream for many renters in some parts of the U.S. Figures show prices rose 12.4 percent in the year to April. This was a big jump on the 9.7 per cent increase recorded in March and means the average selling price rose by £31,000 – more than the average UK wage – to £281.00. For now, it appears that buyers are willing to fend off a relatively modest rise in monthly mortgage payments, although official figures do not yet reflect the latest rate hikes. All four nations saw big gains in the cost of a house with average prices rising in England to £299,000 (11.9%), Wales to £212,000 (16.2%), Scotland to £188,000 (16.2 %) and in Northern Ireland at £165,000 (10.4 per cent). Thomas Kingsley4 August 2022 10:24 1659603541
Liz Truss threatens to interfere with Bank of England mandate after policy row
Liz Truss is set to review the Bank of England’s mandate after backers in her leadership campaign said it was “too slow” to raise interest rates. The Tory leadership frontrunner believes the bank, which has been independent of the government since the 1990s, should have raised rates “a long time ago”. However, policy is currently set by an independent panel of economists, meaning the government currently has no direct say in whether they go up or down. However, speaking ahead of the announcement, an ally of Ms Truss insisted on Thursday morning that the central bank would remain independent despite the prime minister’s planned involvement. Read the full story below:
Liz Truss to intervene in Bank of England mandate after policy disagreement
The frontline Tory leadership has disagreed with the Bank’s policy on interest rates Thomas Kingsley 4 August 2022 09:59 1659602083
More than half a million South East homeowners face ‘mortgage time bomb’
More than half a million homeowners in London and the South East are facing a ‘mortgage time bomb’, new analysis has revealed. With the City widely expecting a historic half a percentage point rise in interest rates from the Bank of England’s Monetary Policy Committee (MPC) on Thursday, 565,000 people in the capital and surrounding area face paying hundreds of pounds more each month as a cheaper fixed rate offers expire. Successive rises in the Bank of England’s base rate since February mean the typical tracker mortgage holder is already paying an extra £104 a month — or £1,248 a year — and will see an immediate rise in payments from a further rise. The repayment figures compiled by the Lib Dems were based on figures from trade body UK Finance and were calculated using a typical fixed average mortgage balance of over £160,000. (PA file) Thomas Kingsley4 August 2022 09:34 1659600965
The Bank of England is ‘very worried’ about the looming recession, experts say
Torsten Bell, managing director of living standards at think tank the Resolution Foundation, said he would be surprised to see more 0.5% interest rate rises after today, as the Bank of England is “very concerned” that a recession is looming. Speaking on BBC Radio 4’s Today show about what the Bank of England might do in the circumstances, he said: “Obviously there are a lot of different shocks happening at the same time here in our economy and in inflation. “Some of these broader shocks are softening and that has to do with global supply chains and because of the increases in global commodity prices that I just mentioned, but others are getting worse and that has to do with the Russian war and what’s happening in energy prices. “This is not going to go away, and rate hikes are only about that to the extent that they prevent it from being incorporated into our wage-setting processes in the coming months and years. There is nothing they can do about this real increase in energy prices. Mr Bell added: “I think there is pressure from the global situation for people to raise interest rates by large amounts. We may see a rise of half a percentage point today. “I would be surprised if we see that for several months because actually if you look at what the Bank of England is telling us, they are also very concerned about the state of the economy – that there could be a recession looming. We may get a recession forecast in the forecast update from … the Bank of England later today.” Thomas Kingsley 4 August 2022 09:16 1659599613
Sunak and Truss clash over tax plans ahead of debate
Rishi Sunak has launched a fresh attack on Liz Truss’ plans for tax cuts ahead of the pair’s next debate in their bid to become prime minister. The former chancellor said his rival for foreign secretary in the Tory leadership race would further raise interest rates, pushing up mortgage payments, with her plans. His warning came as the Bank of England was forecast to raise interest rates to their highest level in nearly three decades on Thursday, from 1.25 percent to 1.75 percent. The former chancellor stressed there were “critical differences” between their plans “because timing is everything”. “If we rush in with early tax cuts before inflation catches up, all we’re doing is giving with one hand and then taking away with the…
