The Bank of England is poised to push interest rates again later this week, this time to their highest level since 2009, as it fights to keep inflation from spiraling out of control.
As the Ukraine war exacerbates an already devastating standard of living, officials are set to raise rates by 25% — which is equivalent to a 13-year high – and thereby raise inflation predictions.
In an attempt to contain inflation (which reached a 30-year high of 7% in March), the members of the Monetary Policy Committee (MPC) have pushed rates up in each of their last three sessions.
BOE to Monitor Impact Before Further Rate Hikes in 2023
When the energy price cap is updated towards the end of the year, the cost constraint is projected to squeeze even further, with warnings that inflation might hit 9% or rise higher towards the end of the year.
According to analysts, UK growth will suffer as families and companies live within their means in response to inflation, and the Bank of England is anticipated to lower its economic forecast on Thursday.
An Investec analyst lamented the situation, saying the United Kingdom is currently battling with the standard of living due to inflation, and that adding tax hikes to it means there is a hard path ahead.
They believe an economic downturn will be averted, due in part to family savings accumulated during the pandemic, but that slowing GDP and rising prices put the MPC in a fix.
In August, Investec expects a further rise in rates to 1.25 percent.
However, it is anticipated that the BOE will stop to evaluate how much of an impact the actual income squeeze has on productivity before imposing two more rate hikes in 2023.
As the standard of living drops, growth slowed drastically in February, with official figures indicating an expansion of only 0.1 percent, down from 0.8 percent in January.
The pound sterling is predicted to respond to the interest hike with a price increase.
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