Bank of England raises interest rates for 12th time in a row

May 11, 2023

The Bank of England has imposed another interest rate hike on the UK economy today - the 12th consecutive increase as it continues to battle rampant inflation.

Both financial markets and economists widely expect a 0.25 percentage point rise to 4.5%.

The Bank Rate had stood at 0.1% in December 2021 before the current cycle began to tackle the pace of price rises, which were initially caused by economies getting back in gear after the long-term effects of the COVID pandemic.

Russia's invasion of Ukraine the following February then exacerbated the inflation problem, with soaring energy costs piling additional pressure on Western nations.

These considerable extra costs, faced by households and businesses alike, are still lingering through in the form of stubborn inflation for many goods and services despite wholesale energy costs easing in recent months as pressure eases.

It stood at 10.1% in the year to March, down slightly from 10.4% in February, but the same as January.

The latest official figures showed the headline consumer prices index (CPI) measure at 10.1% - fed by the highest grocery inflation for 45 years.

The Bank is also likely concerned that higher-than-expected wage increases will embed inflation in the economy over the months ahead.

On a positive note, the inflation data for April is set to strip out the effects of the leap in household energy bills seen in April 2022 while the cost of fuel, which was also on the march at that time, is now well down on the levels seen in the same month a year ago.

Some economists are now predicting a CPI number for April below 8% due to the impact of lowered energy prices alone.

Raising interest rates helps to control inflation by making it more expensive to borrow money. This encourages people to borrow less and spend less, and to save more.

Since the global financial crisis of 2008, UK interest rates have been at historically low levels. Rates were at 0.1% in 2021.

All Insight Articles >Contact Us >

Latest Insight