The Bank of England (BoE) has raised interest rates once again, increasing financial pressure on those with loans and mortgage payments.
Decision makers on the Bank's Monetary Policy Committee (MPC) decided to raise the base rate from 3.5 per cent to 4 per cent in a bid to drive down inflation. The Bank warned that the UK is still on the path towards a recession, however it highlighted that the economic downturn could be less impactful and shorter than previously predicted.
An earlier forecast predicted that peak-to-trough gross domestic product (GDP) is set to shrink to 1 per cent from around 3 per cent. This is due to the fall in wholesale energy prices which has taken place since the last MPC forecast in November.
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Chancellor Jeremy Hunt said: "Inflation is a stealth tax that is the biggest threat to living standards in a generation, so we support the Bank’s action today so we succeed in halving inflation this year,” he said.
“We will play our part by making sure Government decisions are in lockstep with the Bank’s approach, including by resisting the urge right now to fund additional spending or tax cuts through borrowing, which will only add fuel to the inflation fire and prolong the pain for everyone.”
Liberal Democrat Leader Sir Ed Davey said the latest rise in interest rates by the Bank of England is a “hammer blow” for families struggling with the cost of living crisis . He said: “This is a hammer blow to hardworking families across the country.
"Today’s decision to hike mortgage rates has added fuel to the fire of this cost-of-living crisis. The blame lies squarely with the Conservative Government whose botched budget last year sent mortgage rates spiralling. Their complete failure to get inflation down has led to homeowners paying the price.”
It is understood that the UK will suffer a recession of five consecutive quarters, beginning in the first three months of 2023.
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