Bank of England pushes interest rates to new 15-year high – live

Martin Lewis addresses inflation rates unexpectedly falling

The Bank of England has pushed interest rates to a fresh 15-year high, as it announced its 14th consecutive rise in the cost of borrowing.

The central bank raised its base rate by a further 0.25 points to 5.25 per cent on Thursday, the highest level since February 2008, as part of its ongoing bid to tame inflation by cooling Britain’s economy.

The latest increase is lower than the shock hike of 0.5 per cent announced in June, and comes after the latest inflation statistics suggested price rises had finally slowed by a greater margin than anticipated.

Consumer Prices Index (CPI) inflation was 7.9 per cent in June, down from 8.7 per cent in May and the lowest rate since March 2022, according to official figures from the Office for National Statistics (ONS).

As a result, some economists now believe an end to the cycle of hiking interest rates may be in sight, with the base rate potentially peaking as low as 5.5 per cent later this year.


Bank of England should have ‘held its horses’, says think-tank

The New Economics Foundation think-tank said the Bank of England should have “held its horses” before pushing up interest rates again.

“When the Bank raises interest rates, it takes time for those effects to filter through the economy,” said senior economist Lukasz Krebel.

He warned that households with mortgages are “already struggling” after 13 interest rate increases and today’s rise “could damage the economy by discouraging investment”.

Andy Gregory3 August 2023 12:37


Pound drops after Bank of England raises rates

The pound and British government bond yields dropped slightly after the Bank of England raised interest rates by 25 basis points.

Market expectations prior to the meeting were almost evenly split between a 25 and 50 basis point increase.

The pound traded as much as 0.66 per cent down on the day, hitting a fresh one month low, after the decision. It then pared losses to be at $1.2658, 0.4 per cent lower, largely where it was before the decision.

British government bond yields dipped. The benchmark 10 year gilt yield, which had been higher ahead of the decision, was flat at 4.4 per cent, and the rate-sensitive two year yield was down 8 basis points at 4.91 per cent.

The FTSE250 index of British midcap stocks was last up 0.3 per cent and the FTSE 100 pared loses and was down 0.6 per cent.

Alun John3 August 2023 12:26


Inflation will fall to 3% next year ‘if we stick to the plan’, says Jeremy Hunt

Jeremy Hunt said Britain could avoid a recession and see inflation dip below 3 per cent in a year’s time “if we stick to the plan”.

But the chancellor acknowledged it would not be easy for households struggling with higher mortgage payments.

Reacting to the Bank of England’s decision, he said: “If we stick to the plan, the Bank forecasts inflation will be below 3 per cent in a year’s time without the economy falling into a recession.

“But that doesn’t mean it’s easy for families facing higher mortgage bills so we will continue to do what we can to help households.’”

(James Manning/PA)

Andy Gregory3 August 2023 12:19


Interest rate hike ‘incredibly worrying’ for households, says Labour

Labour said the increase would be “incredibly worrying for households across Britain already struggling to make ends meet”.

Shadow chancellor Rachel Reeves said the Conservatives were responsible for “crashing the economy”, leaving households with higher mortgages, higher food bills and higher taxes.

She said: “The Tory mortgage bombshell is hitting families hard, with a typical mortgage holder now paying an extra £220 a month when they go to re-mortgage.”

(James Manning/PA)

Andy Gregory3 August 2023 12:12


Just one Bank of England committee member votes to keep rates level

Six members of the Bank of England’s nine-strong Monetary Policy Committee (MPC) opted to increase the base rate by 0.25 percentage points.

But two others, Jonathan Haskel and Catherine Mann, voted for a bigger half-point increase, while just one member, Swati Dhingra, preferred to keep the rate at 5 per cent.

The MPC said that some of the risks from more persistent inflation, notably wage growth, had “begun to crystallise”, prompting it to push borrowing costs higher.

The policymakers also indicated that interest rates would need to stay higher for longer in order to bring inflation back down to its 2 per cent target.

(Yui Mok/PA)

Andy Gregory3 August 2023 12:11


Rishi Sunak to meet inflation target under new Bank of England forecasts

UK inflation is expected to drop below 5 per cent in the final few months of 2023, allowing Rishi Sunak to meet his target of halving inflation by the end of the year, according to new projections from the Bank of England.

The Bank predicted that Consumer Prices Index (CPI) inflation will fall to 4.9 per cent in the final quarter and remain above 2 per cent until mid-2025.

The recent easing of price rises has been driven largely by a fall in international energy prices, which are set to reduce the average UK household’s energy bill to below £2,000 a year by October.

The Bank added in its report: “Food price inflation, which has a particularly large impact on the living costs of lower-income families due to it making up a larger share of these families’ budgets, remains extremely high.”

But it expects annual food inflation to fall to around 10 per ent by the end of the year as lower input prices make their way down the supply chain.

Andy Gregory3 August 2023 12:08


Interest rate hike is ‘wrong decision’ once again, says Unite

Trade union Unite has slammed the interest rate hike as the “wrong decision once more”, reports our political correspondent Archie Mitchell.

General secretary Sharon Graham said inflation is high not because of pay increases but “rampant profiteering” and “greedflation”.

She said: “There is no doubt – workers and their families are continuing to pay the price in this cost-of-living crisis.

“The economy is not working for everyday people and we need to make different choices. Until profiteering is tackled there can be no respite from continuing inflation.”

Andy Gregory3 August 2023 12:07


Bank of England must ‘make absolutely sure’ inflation returns to target, says Andrew Bailey

Commenting on the decision to hike interest rates by a further quarter-point to 5.25 per cent, Andrew Bailey, Governor of the Bank of England said: “Inflation is falling and that’s good news.

“We know that inflation hits the least well off hardest and we need to make absolutely sure that it falls all the way back to the 2 per cent target. That’s why we’ve raised rates to 5.25 per cent today.”

Andy Gregory3 August 2023 12:04


Bank of England pushes rates to new 15-year high of 5.25 per cent

The Bank of England has hiked interest rates for a 14th consecutive time, further raising the cost of borrowing in its bid to tame stubborn inflation.

The central bank’s Monetary Policy Committee increased its base rate by a further 0.25 points to 5.25 per cent on Thursday, the highest level since February 2008.

It follows a shock rise of 0.5 per cent in June, which has piled pressure on mortgage holders and the housing market.

Economists, however, are eyeing an end to the current cycle of rate increases, after the latest inflation figures suggested that the price rises eating into household budgets were falling faster than expected.

You can refresh our breaking story below for updates:

Andy Gregory3 August 2023 12:02


UK economy set to ‘flatline at best’ after sluggish service sector growth

The UK’s economy is set to “flatline at best” after the dominant services sector suffered its most sluggish growth for six months in July, experts warned.

As firms were rocked by the impact of the rising cost of living and spiralling intrerest, the widely-watched S&P Global/CIPS UK services PMI survey showed a reading of 51.5 last month, down from 53.7 in June.

A reading above 50 indicates growth in the sector, which dominates the British economy and covers retail, hospitality and business and finance. But the sharp dip was the third consecutive slowdown in growth, pointing to potential stagnation in the economy.

It came just days after a similar survey showed bosses in manufacturing sector were the gloomiest they have been since the height of the first Covid lockdown.

Our political correspondent Archie Mitchell has the full report:

Andy Gregory3 August 2023 11:33


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