Interest rates increase announced.
The Bank of England (BoE) has today announced an increase in interest rates from 0.5% to 0.75%.
Although January growth was higher than expected, inflationary pressures accelerated by the war in Ukraine has left the BoE struggling to balance rising inflation and reluctant growth.
The BoE have announced the change in an attempt to reduce our current economic struggles, but the interest rate rise is unlikely to bring inflation and increasing energy costs under control.
The BoE has confirmed that inflation will increase to at least 8% by Q2, as Ofgem’s energy price cap is potentially raised in October.
The BoE’s goal of reducing inflation to 2% by the end of the year seems increasingly unobtainable, with governor Andrew Bailey admitting that this aim is probably to be deferred to 2023.
The decision to raise interest rates does send a positive message however, as it suggests the Monetary Policy Committee want to regain some control of the economy. Only time will tell if it will have any significant impact.
Once again, this increases the pressure on Rishi Sunak in advance of next week’s Spring Statement.
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