The Bank of England has announced that interest rates in the UK will rise to the highest level since 2008.
Members of the Bank of England's Monetary Policy Committee voted to raise the interest base rate from 1.75 per cent to 2.25 per cent, while three voted for an even steeper increase to 2.5 per cent. Previously, the central bank predicted the economy would grow in the current financial quarter but is now saying Gross Domestic Product (GDP) will fall 0.1 per cent.
It comes after a reported 0.2 per cent fall in GDP during the second quarter - meaning the economy is now in recession. In committee minutes, the bank said the "tight labour with wage growth and domestic inflation" above targets has called for a "forceful response".
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The bank's decision to increase rates is rooted in keeping inflation under control, with hopes that inflation - currently at 9.9 per cent - will turn back to 2 per cent. Liberal Democrat Treasury spokeswoman Sarah Olney said the interest rate rise would be a “hammer blow to struggling homeowners who are being punished by the Government’s failure to control inflation”.
“This monster rate rise could have been avoided if Conservative ministers bothered to take action sooner on energy bills and the rising cost of living,” she said.
“Instead, the Bank of England is left with no choice but to hike mortgage costs for millions.” She also claimed that Liz Truss should “bail out families and pensioners who will suffer as a result of this mortgage hike”.
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