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The Bank of England has today (22 September) announced that interest rates will be raised by 0.5%, with rates rising from 1.75% to 2.25%.
The latest announcement from the Monetary Policy Committee (MPC) comes as inflation remains at record highs for the UK, and marks the seventh consecutive rise in interest rates to come from the BoE.
UK inflation hit 9.9% last month, down from 10.1% in July, but remains near a 40-year high as prices continue to rise.
As the UK battles with its highest inflation rate in four decades, with rising food and energy prices, the standard of living has faced the biggest slump in years.
In light of this, the BoE has been under pressure to boost the pound, which has been trading at its lowest level against the dollar since 1985 and is similar to that of the financial crash in 2008.
Elsewhere, the US Federal Reserve announced yesterday (21 September) that it has increased interest rates by 0.75%, with US inflation reaching a 14 year high.
Financial markets have predicted that the BoE will more than double interest rates by May next year amid concerns around further rises in UK inflation and rising energy prices, according to the Guardian.
The base rate is expected to finish the year above 3% and could peak at close to 4.1% in June 2023, based on interest-rate derivatives linked to the meeting dates of Threadneedle Street’s monetary policy committee.
The Bank is then expected to cut rates close to 3.8% by the end of next year amid expectations of fading inflationary pressures and a “lengthy” recession.
The MPC said it will take the actions necessary to return inflation to the 2% target sustainably in the medium term, in line with its remit.
Last month (August), the BoE raised interest rates from 1.25% to 1.75%, marking the biggest rise in rates since 1995.
