The Bank of England is expected to announce its biggest rate hike in more than three decades today.
Interest rates are expected to rise 0.75 percentage point from 1.75% to 2.5% at today’s Monetary Policy Committee (MPC) meeting.
It would be the highest interest rate Britain has had since the financial crisis. In December 2008, the key interest rate was reduced from 3% to 2%.
It would also be the highest single rate hike since 1989.
“Investors believe the most likely outcome is that the MPC hikes interest rates by 75 basis points (0.75 percentage point) on Thursday,” said Samuel Tombs, UK chief economist at Pantheon Macroeconomics.
But he said economists expect a smaller increase to 2.25% – the same 0.5 percentage point change as the bank’s last hike.
ING economist James Smith said the Bank of England needs to react to the pound’s recent falls. Sterling hit a fresh 37-year low against the dollar on Friday.
“The Bank of England meeting is crucial,” he said.
“Not only will it show us how concerned policymakers are about the fall in sterling and other UK markets, but also how the government’s decision to cap energy prices for households and businesses will affect monetary policy.
“We narrowly endorse a 50 basis point hike on Thursday, raising interest rates to 2.25%, even though 75 basis points is clearly on the table and we would expect at least a few policymakers to vote in favour.”
He said rates are likely to rise again in November and December, reaching 3% by the end of the year.
The decision to raise interest rates is an attempt to keep inflation under control. It is the best tool the Bank of England has to steer inflation – currently at 9.9% – back towards its 2% target.
But the decisions will also have a big impact on people’s finances, not least those with mortgages who will have to start paying more on their home loans.
https://www.theargus.co.uk/news/national/uk-today/22552142.bank-england-interest-rates-set-rise-today/?ref=rss Bank of England interest rates are set to rise today