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The Bank of England is expected to announce its biggest rate hike in 33 years today.
The market expects the Monetary Policy Committee (MPC) to hike rates by 0.75 percent to 2.5 percent.
It would be Britain’s highest hike since the financial crisis and the biggest rate hike since 1989.
However, economists expect a decline to 2.25 percent when it is announced in the afternoon. This is a change of 0.5 percentage points from the previous increase.
Economists also expect interest rates to rise again in November and December, reaching 3 percent by the end of the year.
In order to keep inflation under control, it was decided to raise rates. It is the Bank of England’s best tool for controlling inflation – currently 9.9 percent – back towards its 2 percent target.
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What do economists say about the rate hike?
“Investors believe the most likely outcome is that the MPC hikes interest rates by 75 basis points (0.75 percentage point) on Thursday,” said Samuel Tombs, UK chief economist at Pantheon Macroeconomics.
But he said economists expect a smaller increase of 2.5 percent – a change of 0.5 percent, similar to the bank’s previous hikes.
“First of all, aggressive surprises from the MPC are a lot less common than last year,” he said.
“Also, Governor Bailey openly mentioned a 50 basis point rise ahead of the August meeting, but did not give markets a boost for prices in a 75 basis point rise.
“We believe the MPC will rise another 50 basis points to honor its commitment to act ‘strongly’ if it sees signs of more persistent inflationary pressures.”
ING economist James Smith said the Bank of England needed to react to the pound’s recent fall. Sterling hit a fresh 37-year low against the dollar on Friday.
“The Bank of England meeting is important,” he said.
“This will show us not only how concerned policymakers are about the fall in sterling and other UK markets, but also how the government’s decision to cap domestic/commercial energy prices will affect monetary policy.”
“We support a 50 basis point hike to bring the key rate to 2.25 percent on Thursday, although 75 basis points is clearly on the table and we would expect at least some policymakers to vote in favor of it.”
He said rates are likely to rise again in November and December, reaching 3 percent by the end of the year.
Matt Mathers22. Sep 2022 09:17
BoE hikes rates
The Bank of England was due to make an announcement earlier this month but was postponed due to the Queen’s death.
Its monetary policy committee was due to meet tomorrow to finalize the announcement, which is expected around noon.
The market expects the bank to announce the biggest rate hike in three decades.
The Bank of England is poised to hike interest rates
The Monetary Policy Committee (MPC) is expected to hike interest rates by 0.75 percent to 2.5 percent, according to financial markets.
Matt Mathers22. Sep 2022 09:07
What are interest rates and why are they rising?
The interest rate is a measure of how much it costs to borrow money or what the return on saving is.
Generally, when you borrow money from a bank, the interest rate on that money is the amount you are charged for borrowing it.
This is a fee that is added to the total amount of the loan and is displayed as a percentage of the total amount.
my colleague Holly Bancroft has more:
Everything you need to know about interest rates and how they affect you
Borrowing costs are already at their highest level in 13 years
Matt Mathers22. Sep 2022 08:58
Good morning and welcome to The Independent’s ongoing coverage of the Bank of England rate announcement.
Analysts expect the rate to increase by at least 0.5 percent, possibly to 0.75 percent, which would be the biggest increase in about 30 years.
The bank statement is expected around noon. We’ll bring you the latest news and feedback as soon as it arrives.
Matt Mathers22. Sep 2022 08:53