Consumer price inflation (CPI) has started to fall but, at 10.5%, it is still very high and well above the Monetary Policy Committee’s (MPC) 2% target. We expect inflation to fall rapidly in 2023, but to make sure that happens, the MPC has increased interest rates to 4%.
This means that since December 2021 we have increased our interest rate in total from 0.1% to 4%. The MPC is conscious that this means many people face higher borrowing costs, but high inflation that lasts for a long time makes things worse for everyone.
We know how hard the impact of higher inflation has been on households over the past year, and that the least well off have been hardest hit.
