Bank hikes interest rates to 4% and warns more to come if Iran war continues
The Bank of England has raised interest rates for the first time in more than three years and warned that further hikes are likely if the Iran war is not resolved.
At its latest meeting, the Monetary Policy Committee (MPC) decided to increase the Bank’s base rate to 4% from 3.75%. It is the first time that borrowing costs have gone up since August 2023. All members of the nine-person committee voted for a hike – although one member, Catherine Mann, preferred a bigger jump of 0.5 percentage points. The MPC said it needed to take action to control rising inflation in the UK economy, which was being pushed higher by the impact of the US and Israel’s ongoing conflict with Iran on global energy and fuel prices. Governor Andrew Bailey said: “There is now enough inflationary pressure in the pipeline caused by the rise in energy prices, that an increase in Bank rate is warranted. “Today’s increase shouldn’t be seen as the first in an inevitable long sequence of hikes. “But, unless the conflict in the Middle East is resolved, neither does it seem likely to be the last increase.” It marks a strong signal from the Bank’s boss that borrowers are heading for a bigger squeeze at a time when the cost of living is rising. The MPC said many companies had so far been absorbing higher energy costs into their profit margins or had hedged against large spikes since the war began around nine months ago. But it warned that such “buffers would only prove temporary and these cost pressures would eventually pass through into higher consumer prices if the energy shock persisted”. This means that households could face price rises in shops for things like food, drink and other goods and services.
Published: by Radio NewsHub