Today, the Bank of England made a significant announcement, declaring a historic 13th consecutive increase in interest rates. This decision stems from the persistent high inflation levels observed in the UK. The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, in a bid to sustain growth and employment.
The Bank Of England (BoE) was under pressure to tighten policy after UK inflation remained high in April and May, at 8.7% in both months. The BoE reported:
At its meeting ending on 21 June 2023, the MPC voted by a majority of 7–2 to increase Bank Rate by 0.5 percentage points, to 5%. Two members preferred to maintain Bank Rate at 4.5%.
Efforts to curb inflation have proven more challenging than initially projected. BoE Governor Andrew Bailey addressed a parliamentary committee on Tuesday, revealing that the process of reducing inflation was taking considerably longer than anticipated. Additionally, Bailey expressed concerns about the tight labour market conditions.
Bailey's remarks followed the release of official data, which indicated a 7.2% annual increase in basic pay during the three months leading up to April. This figure stands as the fastest on record, excluding periods disrupted by the COVID-19 pandemic.
The higher interest rate will intensify the pressure on borrowers, and could mean fixed-rate mortgage costs continue to rise.
The next review is due on 3rd August 2023
Source: Bank Of England
13th Consecutive Interest Rate Rise