The Bank of England is expected to announce its decision on interest rates at midday
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The Bank of England has raised interest rates to their highest level in 13 years as it looks to tackle the cost of living crisis gripping the UK.
It announced an increase from 0.75 per cent to 1 per cent on Thursday, a level which has not been seen since the aftermath of the financial crisis in early 2009.
The Bank of England’s Monetary Policy Committee (MPC) voted in favour of the rise with six votes to three.
Those who opposed it – Jonathan Haskel, Catherine Mann, and Michael Saunders – wanted a larger increase to 1.25 per cent, the central bank said.
It was the fourth time in a row the committee has voted in favour of an interest rate hike, as the UK grapples with soaring inflation driven by rising energy costs.
In its report on Thursday, it also warned the economy will go into reverse and inflation- will peak at more than 10 per cent as the Ukraine war compounds cripppling living costs.
What else has the Bank forecast for the UK economy?
Unemployment
- Rate of unemployment will continue to ease back to as low as 3.6 per cent
- But… it will jump back up to 5.5 per cent within three years
Growth
- UK will technically avoid a recession, which is defined as two quarters of negative growth
- Economy forecast to contract in the final quarter of 2022
- The Bank forecasts zero growth in 2023, followed by 0.2 per cent in 2024 and 0.7 per cent in 2025
Income
- Sky-high inflation will see household disposable income plunge by 1.75 per cent this year – the second highest on record
- Overall real income will tumble by an unprecedented 3.25 per cent this year and fall again in 2023 before beginning to recover
- Rising costs will hammer household and business finances, but “this was something monetary policy was unable to prevent”.
Zoe Tidman5 May 2022 12:37
Value of pound drops
The value of the pound has swung lower following the rise in interest rates and forecast of soaring inflation.
The pound moved 0.18 per cent lower to 1.247 against the US dollar and tumbled by 0.6 per cent to 1.178 against the euro.
Zoe Tidman5 May 2022 12:26
Forecasts on growth and inflation
In a grim set of forecasts, the Bank has predicted growth will contract in the final three months of 2022 as the cost squeeze sees households rein in their spending.
It also inflation will peak at more than 10 per cent, after hitting a three-decade high of 6.2 per cent last month.
Zoe Tidman5 May 2022 12:23
BREAKING: Bank of England raises interest rates to highest level in 13 years
Zoe Tidman5 May 2022 12:02
1 per cent rise in interest rates confirmed
The Bank of England has confirmed interest rates are to rise to 1 per cent.
Zoe Tidman5 May 2022 12:02
Midday decision approaches
Not long now until the Bank of England will confirm any changes to the interest rate. Decision expected at midday.
Zoe Tidman5 May 2022 11:40
Soaring inflation
The interest rate is widely predicted to go up today as the Bank of England looks to curb soaring inflation.
It jumped to a 30-year high in March. Anna Isaac, our economics editor, reported at the time:
Zoe Tidman5 May 2022 11:15
‘Still fairly low by historic standards’
Anna Isaac, our economics editor, has tweeted an important point to note ahead of the forecast interest rate hike today.
The predicted increase would put it at the highest level in a decade, but…
Zoe Tidman5 May 2022 11:01
Decision comes weeks after interest rates already raised
Before the decision is announced today, here is a reminder of what happened the last time the Monetary Policy Committee met on interest rates in mid-March:
Zoe Tidman5 May 2022 10:40
What else will the Bank of England discuss today?
The Bank of England is not only going to be looking at interest rates today.
It is also predicted to ramp up its forecasts for inflation and cut its outlook for the economy.
The Bank is also expected to clarify how it plans sell off some of its £847 billion in government bonds, which it has built up as part of its quantitative easing programme launched amid the 2008 financial crisis.
More to come around 12pm today.
Zoe Tidman5 May 2022 10:17
