He expressed concern that UK companies would keep raising prices too fast for too long — even though he declared that inflation, which edged down to 10.7 per cent in November, “has reached its peak”…reports Asian Lite News
The Bank of England has raised UK interest rates to their highest level for 14 years as it battles to stem soaring prices.
It lifted interest rates for the ninth time in a row, increasing them to 3.5% from 3%.
The rise will hike mortgage payments for some homeowners and those with loans at a time when many people are struggling with the cost of living.
It should also benefit savers, if banks pass on the higher rate to customers.
The Bank of England has been attempting to calm rising prices since the end of last year. Inflation – the rate at which prices rise – has been increasing at its fastest rate for 40 years.
The Bank also indicated it was likely to continue to raise interest rates next year. It means that homeowners with variable rate mortgages or first-time buyers looking to get on the property ladder could face higher costs.
Following the most recent rate rise, people on a typical tracker mortgage will pay about £49 more a month while homeowners with a standard variable rate mortgages face a £31 jump.
The US Federal Reserve raised its benchmark interest rate by 0.5 percentage points on Wednesday. The European Central Bank increased its deposit rate by the same margin as the Fed on Thursday.
Andrew Bailey, BoE governor, said: “I know raising interest rates has a real impact on people’s lives, but by raising interest rates we can bring inflation down sooner and help the economy begin to grow and prosper once more.”
He expressed concern that UK companies would keep raising prices too fast for too long — even though he declared that inflation, which edged down to 10.7 per cent in November, “has reached its peak”.
“The labour market remains tight and there has been evidence of inflationary pressures in domestic prices and wages that could indicate greater persistence,” he wrote in a letter to Jeremy Hunt, the chancellor, about the MPC’s latest decision.
Bailey added that such factors justified “a further forceful monetary policy response”. The majority of MPC members said further rate rises were likely “for a sustainable return of inflation to target”. The BoE inflation target is 2 per cent.
But they did not say whether rates would have to rise as high as financial market expectations, which at present forecast a peak of just above 4.5 per cent by the middle of 2023.
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