Base Interest Rate Raised To One Percent

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May 23rd 2022
Tax Week 7
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Base Interest Rate Raised To One Percent

Bank of England hikes rate to highest level in 13 years.

The fourth consecutive interest rate rise now sees the base rate touch one percent - the first time at the level since 2009.

The Monetary Policy Committee (MPC) added 0.25 percent to the existing 0.75 percent base interest rate this afternoon in a further attempt to slow down spiraling inflation.

This rate rise could have been higher as a third of MPC members wanted the rate to rise to 1.25 percent.

There is a combination of pressures that are causing the tidal wave of inflation, such as supply chain interruptions across the world, through war and the pandemic. Although these pressures are signals in the move to raise rates, the March rate rise was before war in Ukraine was a factor.

The continuing need to increase interest rates is worrying many that a recession is looming - across the Atlantic the United States is currently also on the receiving end of the biggest interest rate increase in 22 years.

Chancellor Rishi Sunak believes the UK will see the base interest rate hit 2.5 percent by this time next year.

Inflation is currently running at 7 percent - a full 5 percentage points over where it should be - the target rate is 2 percent. Inflation is actually expected to get to 10 percent at some point during the year.

The longer term outlook, at least by the MPC, is not all gloomy with external pressures to ease over the coming years and inflation to get down to just over 1 percent in three years time.

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