Bank of England is set to hike interest rates by 0.25% TODAY


More pain for Britons with Bank of England set to hike interest rates by 0.25% TODAY to control rampant inflation – after 0.75% rise in the US – despite fears economy is heading for recession

  • The Bank of England is due to announce latest interest rates decision at noon
  • The base rate is expected to go up 0.25 percentage points to 1.25 per cent
  • Rise could have been bigger but fears that UK economy is already in reverse 

Britons are facing more cost-of-living pain today as the Bank of England prepares to hike interest rates for the fifth month in a row.

The Monetary Policy Committee is expected to push up the base rate by 0.25 percentage points to another 13-year high of 1.25 per cent as it scrambles to rein in rampant inflation.

But mortgage-payers are expected to be spared an even bigger increase – which many analysts had anticipated could be 0.5 percentage points – after grim figures this week showed the UK economy is already going into reverse.

The decision at noon will come after the US Federal Reserve imposed an eye-watering 0.75 percentage point increase as it wrestles with the same problems.  

If the Bank of England rate reaches 1.25 per cent as expected it will be the first time since January 2009 it has been higher than 1 per cent.

Bank of England governor Andrew Bailey is set to announce the interest rates decision at noon today

Bank of England governor Andrew Bailey is set to announce the interest rates decision at noon today

If the Bank of England rate reaches 1.25 per cent as expected it will be the first time since January 2009 it has been higher than 1 per cent

If the Bank of England rate reaches 1.25 per cent as expected it will be the first time since January 2009 it has been higher than 1 per cent

The nine-person MPC includes governor Andrew Bailey, two deputy governors – Sir Jon Cunliffe and Ben Broadbent – and chief economist Huw Pill.

With headline CPI inflation forecast to reach double-digits by the end of the year, the MPC has voted for a rise in each of the last four meetings, in December, February, March and May.

However, it has been criticised for not responding quickly enough to rising prices and the overheating labour market. 

Last time three out of nine members of the Monetary Policy Committee already voted for rates to be set at 1.25 per cent.

However, some things have changed since then. The UK economy looks set to struggle, with an OECD forecast predicting it will be the weakest in the Group of Seven (G7) next year.

The Bank has been given a little more wriggle room by the Chancellor, who is set to funnel billions to struggling households to help them deal with soaring energy bills.

An interest rate raise will eat away at some of this handout, because the cost of borrowing will go up for homeowners.

But savers will benefit from a hike.

‘April’s GDP data … surely will mean that the internal block – Bailey, Broadbent and Pill – sticks to voting to raise Bank Rate by 0.25% this month,’ said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

‘And given that some members thought last month that the guidance regarding further rises in interest rates was obsolete, we expect to see at least one of them, most likely Cunliffe, to vote for no change.

‘With markets currently pricing in a 34bp increase in Bank Rate this week and a further 41bp rise for the August meeting, we expect both rate expectations and sterling to drop in the wake of this week’s meeting.’

Laith Khalaf, head of investment analysis at AJ Bell, said: ‘The Bank of England faces a stern test of its mettle at the next interest rate decision, and any hesitation is likely to result in the pound being punished on the currency markets.’

Such a drop would mean that the price of petrol and diesel, and other imports that the UK pays for in dollars, would rise.

This month, the average price of filing a family car topped £100 for the first time.

‘By raising interest rates, the Bank is putting the brakes on an economy that is already slowing of its own accord,’ Mr Khalaf said.

‘That risks the economy stalling, or worse, going into reverse.’

GDP was down for the second month in a row in April after a 0.1 per cent dip in March, underlining the 'Stagflation' threat as inflation soars

GDP was down for the second month in a row in April after a 0.1 per cent dip in March, underlining the ‘Stagflation’ threat as inflation soars

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