The Bank of England is preparing for multiple rate hikes to calm growth, potentially starting with an increase from 4% to 4.25% at its 17 December meeting. Higher borrowing costs will elevate mortgage deals and loan rates, pushing businesses to transfer their expenses to buyers. Because many families cannot absorb higher retail prices, public entities representing a quarter of the economy's consumption will bear significant cost increases. These mounting broader pressures could prompt many of the nation's 33 million workers to demand higher wages.
Key points
Government bodies face the greatest vulnerability to corporate price increases due to alr…: Government bodies face the greatest vulnerability to corporate price increases due to already inflated infrastructure and consultancy budgets.
Household financial fragility means only top-half earners have sustained spending this ye…: Household financial fragility means only top-half earners have sustained spending this year by drawing down their accumulated savings.
Escalating living and financing costs could lead many of the UK's 33 million workers to d…: Escalating living and financing costs could lead many of the UK's 33 million workers to demand significant pay increases.
Sources checked by our analysis pipeline: 1
A head of steam is building up behind the Bank of England raising interest rates again. With the latest forecasts by the central bank showing inflation rising to 5% next spring, another increase in the cost of borrowing seems inevitable, and may come as soon as next month.
A growing number of analysts predict the Bank’s policymakers will don Scrooge masks when they meet on 17 December to deliver a message of austerity and sacrifice.
So sclerotic is the economy, so lacking in flexibility or productive spare capacity, that even the burst of growth experienced by the UK over the last year, defying most forecasters, must be calmed down with higher interest rates or else inflation will rip.
Huw Pill, the Bank’s chief economist, told the Financial Times on Saturday that more than one rate rise was almost certain.
This is not a message anyone who borrows money will want to hear, especially when the festive season is in full swing. If interest rates edge up from 4% to 4.25%, mortgage deals will rise and business loans will become more…
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