Bank of England ‘all but confirmed’ to raise rates to 13-year high – ‘Uncharted waters!’

Interest rates: Expert advises on savings and mortgages

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Later this week, the financial institution’s Monetary Policy Committee (MPC) will vote to confirm whether the country’s base rate will be raised once again. Currently, early forecasts by financial excerpts suggest that the base rate will be increased from 0.75 percent to one percent. This will represent the highest rise to the UK’s base rate in 13 years to combat the current cost of living crisis.

As it stands, inflation has hit seven percent in the UK which has caused the prices of everyday goods and services to skyrocket.

Inflation is predicted to rise to around eight percent in the second quarter 2022 Q2, and maybe by even more later in the year.

Concerns were raised by the bank that inflation could increase by even further by the end off 2022 by “several percentage points”.

On top of this, the average household in the UK is experiencing an annual hike of £693 in their energy bills.

READ MORE: Woman, 88, in tears after losing £36,000 savings – after ‘scrimping’ for 50 years

Shafiq Shabir, the head of Electronic Trading at Intertrader, outlined why another rate increase is “all but confirmed”.

Mr Shabir explained: “A fourth rate hike is all but confirmed for May’s meeting of the Bank of England Monetary Policy Committee.

“But what’s splitting economists and commentators this time around is the extent to which the Bank will raise interest rates – whether by 25 or 50 basis points.

“This could lead the Bank into somewhat uncharted waters, as the committee previously set one percent as the threshold at which it would consider commencing the sell-off of the billions of pounds of government bonds it has amassed in the last 13 years.

“The hand of history will weigh heavily on rate setters’ minds as this would be a fourth consecutive rate rise – another first in Threadneedle Street’s history books.

“Memories might be short but considering that February saw the first back-to-back rate hike, we have clearly come a long way since.”

Looking at the wider pressures placed on the country’s economy, Mr Shabir shared the difficulty being placed on the Government and the Bank of England in navigating savers through this crisis.

On this issue, he added: “It’s clear the UK economy is somewhat stuck between a rock and a hard place.

“Recent data has given a measurably bleak outlook on both the growth and inflationary fronts, and this is only set to be amplified when April’s figures come out in a few weeks.

“Recent remarks from Andrew Bailey that the Bank is walking a ‘narrow path’ between growth and inflation are therefore no surprise.

“Traders will be eagerly listening out for any signal of the Bank’s mid-term path as the cost-of-living crisis continues to sting the British economy.”

After the Bank of England’s decision to raise interest rates in March, Richard Eagling, a senior personal finance expert at NerdWallet, emphasised how these decisions impact households.

Mr Ealing explained: “Today’s decision from the Bank of England to hike interest rates will undoubtedly place many households under greater financial strain.

“Teamed with high inflation and soaring gas, electricity and food prices, as well as the fact that the average UK adult holds around £32,000 of debt, today’s increase could impact some people’s ability to afford their repayments.

“Make no mistake, these are extremely challenging times as far as financial management is concerned.”

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