The Bank of England's rate-setting panel is split on future moves, though current forecasts suggest only one more increase may occur in February. Inflation is anticipated to peak just below 5% next spring, exacerbated by a 27% January jump in typical annual household energy bills to £2,150. Meanwhile, the British pound has climbed to its strongest level since the Brexit vote, helping curb import costs despite ongoing conflict risks.
Key points
Borrowers on variable-rate mortgages will experience an immediate financial squeeze follo…: Borrowers on variable-rate mortgages will experience an immediate financial squeeze following the move to 4%.
Stronger economic growth and a post-Brexit high for sterling are helping to cushion the d…: Stronger economic growth and a post-Brexit high for sterling are helping to cushion the domestic impact of imported inflation.
The path of future monetary tightening remains closely linked to the ongoing nine-month I…: The path of future monetary tightening remains closely linked to the ongoing nine-month Iran War and shifting energy costs.
Sources checked by our analysis pipeline: 1
- Published
Interest rates have risen to 4% and the Bank of England has indicated there are more rises to come. The question is how many? There is a split on the rate-setting committee here.
Three of the nine voting members referred to "rises" plural. One member voted for a double increase to 4.25%. Three referred to just one more including governor Andrew Bailey.
My read on this is that the expectation is for one more rise in February. Two and done, but it depends.
It is painful for those on variable mortgages, but should not be seen as the start of a cycle of hikes.
Predicting where interest rates will go is like throwing darts at a board that constantly moves around the wall, with expectations of how long the Iran War will last and its impact on the economy and prices lurching from day to day.
At least there is no blindfold.
The Bank's forecasts indicate inflation is heading to just under 5% next spring as a typical household energy bill surges by 27% in January to £2,150…
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