The Bank of England is also scheduled to reveal long-term inflation projections, which are expected to indicate that next year’s cost of living will exceed its target of 2%.
Today, the Bank of England is anticipated to announce the largest interest rate increase in decades.
An increase of 0.75 percentage points, the largest since 1992, is projected, bringing the base rate to 3%, a level not seen since 2008.
If confirmed, this could increase mortgage payments for millions of individuals over the next few months.
This would also be the ninth consecutive increase in interest rates by the Bank of England. Before a year, the base rate was only 0.1%.
Before the reversal of the mini-budget and Liz Truss’ resignation as prime minister, the markets had expected that today’s hike may be a full percentage point. However, sentiment has improved after the reversal of the mini-budget and Truss’ resignation.
The Bank of England is also scheduled to reveal long-term inflation projections, which are expected to indicate that next year’s cost of living will exceed its target of 2%.
Inflation reached 10.1% in September, matching the 40-year peak observed in July, with the majority of this increase attributable to increased food prices.
The Bank of England is attempting to bring core inflation, which excludes volatile items such as gasoline and energy costs, under control with these rate hikes.
Deutsche Bank analysts have cautioned that they anticipate the BoE’s estimates will indicate that “the economic outlook has deteriorated further” and that “based on market pricing, the UK economy will likely enter a deeper and more protracted recession.
Firms face “very difficult decisions,” warns Labour.
This afternoon, the shadow chancellor of the Labour Party will warn that the latest increase in interest rates will have a significant impact on consumers and businesses.
Rachel Reeves will remark at the Anthropy conference in Cornwall: “Mortgage payments will increase for families with already-tight finances as a result of rising interest rates. It will increase the cost of funding for firms.
“For many businesses that have endured a terrible number of years, this will necessitate incredibly difficult decisions about whether to continue operations.
As demand is squeezed out of the economy, it will have major repercussions for growth, and even companies that can stay afloat will face difficult options regarding whether to invest or expand.
Yesterday, more than a quarter of consumers have begun using their credit cards to purchase food, and a fifth have taken out loans this year in response to rising prices.
The United States also raises interest rates
The Bank of England’s decision will be made one day after the Federal Reserve of the United States stated that it will also raise interest rates by 0.75 percentage points.
Fed Chairman Jerome Powell’s suggestion that the US base rate may need to be raised much farther than previously anticipated to combat the worst inflation in decades precipitated a dramatic decline on Wall Street.
He advised: “It is quite early, in my opinion, to consider or discuss stopping our rate hikes. We still have much to go.”
Mr. Powell also stated that the Federal Reserve would prefer to err on the side of pushing interest rates too high as opposed to lowering them too rapidly because of concern that a premature withdrawal could sustain inflation.
