Bank of England hikes interest rates to new 15-year high of 4.5%
11th May 2023

Bank of England hikes interest rates AGAIN to new 15-year high of 4.5% in body blow to mortgage-payers and hints at more to come with inflation ‘stickier’ than expected… but forecasts for UK economy are upgraded

  • Move makes borrowing more expensive, as banks are pushed to lift savings rates

Brits face more cost-of-living woe today as the Bank of England hiked interest rates to a new 15-year high – and warned of more to come.

The base rate has been pushed up 0.25 percentage points to 4.5 per cent, heaping pain on millions of mortgage-payers.

It is the 12th consecutive bump, and a peak since October 2008 – before the credit crunch sent the level tumbling. 

The Monetary Policy Committee voted for the rise by a margin of seven to two, and highlighted that inflation – in particular food costs – has failed to fall as fast as anticipated.

The MPC suggested that Rishi Sunak is on the edge of missing his target of halving the pace of price rises by the end of the year, with CPI predicted to be 5.1 per cent by the last quarter. 

However, the Bank sharply upgraded its views on the economy, saying GDP is set to be 2.25 percentage points higher at the end of the three-year forecast period than pencilled in at the February meeting. 

That is the largest upgrade since 1997 when the MPC was formed. 

Around 2.2million people with variable rate mortgages will face immediate increases in their bills. However, MPs have criticised the biggest high street banks for dragging their heels over passing on the benefit to loyal savers. 

Brits face more cost-of-living woe tomorrow with the Bank of England expected to hike interest rates to a new 15-year high. They are currently 4.25 per cent

Markets have been pricing in more rate hikes by the Bank of England after annual CPI came in higher than expected at 10.1 per cent in March

There had been hopes that the cycle of tightening monetary policy had been coming to an end.

In March the MPC had indicated it would hold rates steady unless there was evidence of ‘persistent’ inflationary pressure.

But since then the headline CPI has come in at 10.1 per cent, well above the 9.2 per cent Threadneedle Street had pencilled in for March. The Bank of England’s target is just 2 per cent.

The US Federal Reserve and the European Central Bank have also continued the sequence of increases.

While mortgage-payers suffer spiralling costs, rising rates have offered some benefits to savers.

However, banks have been criticised for failing to pass on the higher interest levels.

The Treasury Committee has written to Nationwide Building Society, Santander, TSB and Virgin Money about their easy access savings accounts. 

Despite the BoE rate hitting 4.25 per cent, the big four are offering savers between 0.7 and 1.3 per cent. 

Comittee chair Harriett Baldwin said: ‘In a high interest rate environment, and with further Bank of England base rate rises possible, banks must do more to encourage saving.’ 

New quarterly GDP figures are due for release tomorrow, and are expected to show the UK economy grew marginally over the first three months of the year.

The US Federal Reserve decided last week to raise interest rates by 0.25 percentage points, but hinted it could be the last hike before rates start to come back down.

The European Central Bank (ECB) also opted for a 0.25 percentage point increase but left the door open for further increases, with president Christine Lagarde saying ‘the inflation outlook continues to be too high for too long’.

Markets have priced in a 0.2 percentage point increase to 4.5 per cent when the latest decision is announced by governor Andrew Bailey at noon

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