June 24, 2022

Interest rates in the United Kingdom have risen further as the Bank of England attempts to slow the rate of price rises.

The sixth straight increase has pushed rates from 1 percent to 1.25 percent, the highest level in 13 years.

It happens at a time when money is already tight due to the rising cost of living caused by record fuel and energy prices.

The pace of price growth is already at a 40-year high of 9 percent, and the Bank issued a warning that it may reach 11 percent later this year.

The Bank predicted that growing energy costs will increase living expenses even further in October, but it also stated that should inflation pressures persist, it would “act aggressively.” According to Capital Economics, the Bank may eventually need to increase interest rates to 3%.

Raising interest rates is one strategy for attempting to stop inflation or rising prices. Due to the rising cost of borrowing, more people are borrowing and spending less money. People are encouraged to save more by higher interest rates.

Homeowners with a typical tracker mortgage will pay an additional £25 per month as a result of the June rate increase. There will be a £16 increase for those with ordinary variable rate mortgages.

Meanwhile, some businesses believe rising borrowing costs may curb customer spending.

The Bank did not revise its forecast for the July through September quarter, but it has previously stated that it anticipates economic expansion at this time.

If it succeeds, the UK will avoid going into recession this year, which is defined as when the GDP contracts for two consecutive quarters.

Source: BBC
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