ATTIVO
Interest Rate Rises
On Friday 6th, the Bank of England raised interest rates for the fourth consecutive time in the space of 6 months. With inflation currently at 7% in the UK, and expected to rise as high as 8%, we expect the Bank of England to continue to use monetary policy to try and contain the price rises being felt by households.
Since war was declared in Ukraine, energy prices have soared in the UK due to the reliance on Russian gas and oil. Helen Dickinson, chief executive of the British Retail Consortium, said: “The impact of rising energy prices and the conflict in Ukraine continued to feed through into April’s retail prices.”
Further data from the Bank of England, showing a 10.6% increase in credit card borrowing in March compared to last year – the highest growth since 2006, appeared to add to evidence of the squeeze on consumers, and concerns about falling living standards have been widely reported since the Chancellor’s Spring Statement.
Experts predict that interest rates could rise to between 1.5% and 2% before the end of 2022, pushing them to a 10-year high. Raising interest rates is one tool the Bank of England has to encourage people and businesses to borrow and spend less, or to save money, with the aim of limiting inflation.
The US is also experiencing a 40-year inflation high, with the US Central Bank raising interest rates by 25 basis points in March in response. The Federal Reserve’s decisions have global impact as the economic performance of the US affects many other countries, with the US being the largest export markets for most countries.
Useful links:
https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate
https://www.thetimes.co.uk/money-mentor/article/interest-rates-rise/