Inflation predicted to reach six percent – Bank of England hikes interest rates

Inflation: Bank of England facing 'tricky dilemma' says Martins

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The Bank’s rate setters voted by a majority of 8-1 to increase the Bank rate by 0.15 percent to to 0.25 from its previous rock bottom level of 0.1 percent. The move comes as concern grows over soaring inflation which was revealed to have climbed to 5.1 percent this week. In minutes published today the Bank expects inflation to remain around five percent through winter and peak at around six percent in April. As a result the Bank said the Committee judged an increase of 0.15 percent was “warranted” at the meeting.

Expectation of a rate rise had been dampened due to the uncertainty over the impacts of Omicron and weak growth in the economy shown in recent GDP figures.

The Bank said the MPC will continue to review developments including any emerging evidence on the Omicron variant and its impact on the economy.

Andrew Pottie, Senior Portfolio Manager at Titan Asset Management, commented: “This week’s stronger than expected inflation data and the confirmation of an uneventful end to the furlough in the unemployment data gave the Monetary Policy Committee the confidence to act after surprising markets last month with no hike.

“However, the record number of COVID cases and the ominous threat of a lockdown will weigh on growth forecasts going forward.”

The news will come as a blow to anyone on a variable rate mortgage or with outstanding dept.

Debt charity StepChange warned households now faced a “double whammy” of rising inflation and rising interest.

The charity warned: “Higher interest rates will push up the cost of borrowing while being unlikely to feed through to relief in the form of lower inflation quickly enough to help struggling households through the challenging winter months.”

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