The Bank of England (BoE) is expected to announce its biggest interest rate rise in almost 30 years on Thursday as the UK continues to grapple with soaring inflation.
The central bank’s Monetary Policy Committee (MPC) has already raised interest rates five times this year, overseeing an increase from 0.1 per cent in December 2021 to 1.25 per cent in June as it attempts to put the brakes on runaway inflation – currently at a 40-year high of 9.4 per cent.
It is now expected to hike them even further to 1.75 per cent, with a Reuters poll published earlier this week reporting that 70 per cent of the 65 economists surveyed expected that to happen today.
Should the MPC pull the lever as anticipated, it would be the first 50 basis point rise since 1995 and ramp up the cost of borrowing to its highest level since December 2008 during the Global Financial Crisis.
The BoE’s announcement follows the Resolution Foundation think-tank’s warning on Wednesday that spiralling global energy prices, caused in part by the war in Ukraine, could drive inflation in Britain to an “astronomical” 15 per cent by early 2023, intensifying the squeeze on already-strained household finances and causing a further decline in living standards.
But Torsten Bell, that organisation’s chief executive, told BBC Radio 4’s Today programme on Thursday morning that he would be surprised to see further interest rate rises from the BoE after its upcoming announcement because it is “very worried about the state of the economy” and the prospect of a recession looming.
In another poll published by Ipsos this morning, 64 per cent of respondents said they were fairly or very concerned about the prospect of rising interest rates, a figure that rose to 80 per cent among those aged 18 to 34.
Some 67 per cent said they were worried about the value of their savings, while concern about energy bills and the growing cost of living in general reached 75 per cent and 89 per cent respectively.
The Bank of England will announce its decision in a press conference from 12pm on Thursday 4 August, with its governor Andrew Bailey speaking from 12.30pm.
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