British policymakers raised the benchmark borrowing cost after eight MPC members backed a quarter-point rise and one member pushed for a half-point increase. Soaring crude prices above $100 a barrel following the closure of the Strait of Hormuz are expected to drive the domestic energy price cap to £2,150 in January. Governor Andrew Bailey indicated that additional policy tightening remains possible if persistent price pressures continue to squeeze real post-tax household incomes.
Key points
Borrowers face higher mortgage expenses despite recent government budget measures aimed a…: Borrowers face higher mortgage expenses despite recent government budget measures aimed at offsetting household energy and fuel strains.
Inflation is projected to peak near 4.9% next year as businesses begin passing elevated e…: Inflation is projected to peak near 4.9% next year as businesses begin passing elevated energy costs directly to consumers.
Central bank officials have scheduled their next rate decision for 17 December, with furt…: Central bank officials have scheduled their next rate decision for 17 December, with further increases still on the table.
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The Bank of England has raised interest rates for the first time in three years and warned of another increase to come to combat rising inflation unleashed by the Iran war.
Eight members of the Bank’s monetary policy committee (MPC) voted for the move, which takes the base rate from 3.75% to 4%. The ninth member, Catherine Mann, preferred a more dramatic half-point increase.
The Middle East conflict has pushed oil prices persistently above $100 in recent months, as hopes evaporated of a deal that could reopen the key strait of Hormuz.
As a result, the Bank now expects UK inflation to rise to 4.9% in the middle of next year – up from 3.2% in its last economic forecast, in July. Inflation hit 3.5% in September, as measured on the consumer prices index.
The decision, which will hit mortgage borrowers, comes a week after John Healey used his first budget to promise “breathing space” for hard-pressed consumers. Echoing the Office of Budget Responsibility’s gloomy forecasts for living standards, the MPC expects real post-tax income to fall, this year and…
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