Interest rates increase to 1.75%

In the first half a percent increase in interest rates for over 20 years, the Bank of England has raised the base rate to 1.75%

This is the fifth rise since last December and the Bank argues that it is needed to tackle soaring inflation, stoked by a near doubling in wholesale gas prices since May, owing to Russia’s restriction of gas supplies to Europe and the risk of further curbs.

CPI inflation is expected to rise more than forecast by the Bank in May, from 9.4% in June to just over 13% in 2022 Q4, and to remain at very elevated levels throughout much of 2023, before falling to the 2% target in 2024.

In a very gloomy outlook for the economy, the Bank said: ‘The latest rise in gas prices has led to another significant deterioration in the outlook for activity in the United Kingdom and the rest of Europe.

‘The UK is now projected to enter recession from the fourth quarter of this year. Real household post-tax income is projected to fall sharply in 2022 and 2023, while consumption growth turns negative.’

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