THE Bank of England has raised UK interest rates to their highest level for 14 years in a bid to battle soaring prices.
Decision makers opted to hike the base rate from 3.5% to 4% to help bring down double-digit inflation.
This marks the tenth consecutive time that rates have been risen.
The Monetary Policy Committee voted by a majority of 7-2 to increase the levels by 0.5 percentage points.
UK rates are now at the highest level since October 2008, when the Bank had only just started cutting rates in response to the financial crisis.
It means the UK will suffer a recession of five consecutive quarters, starting in the first three months of 2023.
Summarising today’s decision, the Bank said: “Global consumer price inflation remains high, although it is likely to have peaked across many advanced economies, including in the United Kingdom.
“Wholesale gas prices have fallen recently and global supply chain disruption appears to have eased amid a slowing in global demand.
“Many central banks have continued to tighten monetary policy, although market pricing indicates reductions in policy rates further ahead.”
The Bank forecasted that inflation would continue to slow this year and firms are likely to hold off on making redundancies.
Commenting on the rates, the SNP’s economy spokesperson Stewart Hosie said: “For as long as Scotland finds itself under Westminster control, our economic future will continue to suffer.
“This corrupt, clapped-out Tory government has led the UK to the brink of a recession and ensured the UK is the only major economy tipped not to grow this year.
“That is the cost of their economic mismanagement and their catastrophic Brexit, and today’s interest rate rise will mean mortgage holders now face the unthinkable scenario of having to pay thousands of pounds extra per year in interest.”
The Scottish Greens echoed those thoughts. Their economy spokesperson Maggie Chapman said the news was “another devastating blow” to households and families feeling the impact of the cost of living crisis.
She added: “Despite the cost crisis and pain that many are already feeling, this is the tenth time in a row that rates have increased.
“It is not just an abstract number or an algorithm. People’s wellbeing is at stake, and this rise will force many households to cut back on essentials while making it even harder for others to get on the housing ladder.
“This isn’t happening in isolation. By almost every economic indicator this Tory government is failing and failing badly.
“Only yesterday, millions of people took part in industrial action against a cruel and incompetent UK Government that has lost what little control it still had left of the economy. Now, many of the same people will be looking at even greater costs.
“The sooner we can get rid of this rotten, incompetent and failing Tory government the better.”
The Bank added that the average household energy bill will likely drop below £3000 - the level of the Government's price guarantee - from the beginning of July.
However, it still thinks that gas prices will remain high for years to come. In 2025, gas prices will be around 136p per therm compared to 52p on average between 2010 and 2019.
