UK braces for highest base rate rise in years – Britain faces the biggest interest rate rise for 30 years as the Bank of England steps up its battle against inflation.
In a move that will drive up borrowing costs for millions, the central bank is widely expected to raise its base rate by 0.75 percentage points early next month.
That would be the biggest rise since Black Wednesday in 1992.
Upward trend: The Bank of England is widely expected to raise its base rate by 0.75 percentage points
Some observers even believe the base rate could rise by a full percentage point to 3.25 per cent on November 3.
Warnings of such a dramatic move come despite efforts by top Bank officials to calm expectations of aggressive rate hikes.
Speaking in London on Thursday, deputy governor Ben Broadbent suggested the rate may not rise as far as many analysts have forecast. He warned that rates of over 5 per cent would deliver a ‘material hit’ to the economy.
Philip Shaw, the chief economist at wealth manager Investec, said Chancellor Jeremy Hunt’s decision to scrap £32billion of the tax cuts announced by his predecessor, Kwasi Kwarteng, and the prospect of further austerity were ‘a game changer’ that will help to keep a lid on inflation.
That could mean rates will not, ultimately, have to rise so far. Shaw said: ‘The peak in rates could be closer to 4 per cent than 5 per cent, and if it turns out the Bank has overdone the increases, we could see rates coming down at some stage.’
Simon French, chief economist at broker Panmure Gordon, expects rates to rise by 0.75 percentage points in November and to peak at 4.5 per cent next year.
