The Bank of England’s decision to raise interest rates once again to their highest level for 13 years is a ‘huge blow’ for consumers and borrowers across Britain, experts said today amid forecasts that inflation could hit 10 per cent.
The Bank’s policymakers increased rates from 0.75 per cent to 1 per cent – a level not seen since early 2009 – amid warnings that inflation will continue to rise as the conflict in Ukraine compounds a crippling cost-of-living crisis.
The Bank is battling to cool rocketing inflation, which it said could peak at 10 per cent by the end of 2022 – and it expects the economy to shrink in 2023 by 0.25 per cent, against the 1.25 per cent growth it predicted in February.
Members of the Monetary Policy Committee (MPC) had already raised rates at each of their past three meetings to try to rein in inflation, which hit a 30-year high of 7 per cent in March according to the Consumer Prices Index.
Now, the Bank has ramped up its forecast for CPI inflation to rise from 7 per cent currently to over 10 per cent in October – its highest level for 40 years – due to soaring energy prices which are being compounded by the war.
The cost crunch is expected to tighten its grip later this year when the energy price cap is revised once again – and as households and businesses tighten their belts in the face of the cost pressures, growth is set to suffer.
Experts said that a rise in mortgage rates has already been seen over the past fortnight in anticipation of the Bank’s decision today, with Magni Finance director Ashley Thomas telling MailOnline: ‘Lenders have been expecting this and have increased their rates over the last couple of weeks. Some lenders have changed the rates with less notice than usual, changes within hours instead of a day notice.’
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