Bank of England set to unveil biggest interest rate hike in 33 years

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The decision is due on Thursday and the mortgage could rise again

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The Bank of England is expected to unveil the biggest interest rate hike since the 1980s on Thursday as it tries to contain runaway inflation plaguing British households.

In a crisis meeting, nine members of the monetary policy committee will make a decision that could increase the amount that millions of mortgage holders have to pay to their banks every month.

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The resulting decision is expected to raise the bank’s base interest rate to 3% from the current 2.25%, the highest since 2008. The mortgage is decided against this rate.

If – as expected – the bank raises interest rates by 0.75 percentage points, it will be the single largest increase since 1989.

This will be the eighth time in a row that the bank has hiked interest rates. Less than a year ago the rate was 0.1%.

Earlier this month, markets predicted an interest rate hike could be up to a percentage point, but sentiment eased after the change of chancellor and prime minister and the Bank of England’s bond purchases lowered the cost of borrowing. Till it calmed down.

Markets have also been braced for big hikes globally, with the Bank of Canada raising its interest rate by 0.5 percentage points, well below the widely projected 0.75 percent increase.

Still, last month Bank of England Governor Andrew Bailey said it was likely the increase in interest rates could exceed the 0.5 percent increase seen at the last meeting by 2.25%.

He said on 15 October: “As things stand today, my best guess is that inflationary pressures will require a stronger response than we expected in August.”

Deutsche Bank analysts have said they expect the Bank of England to opt for a 0.75 percentage point increase with a split vote.

Experts at the firm said they expect the latest forecast from the Bank of England, which will also come out on Thursday, to show that “the economic outlook has worsened”.

He added: “Based on market pricing, the UK economy will likely fall into a deeper and more prolonged recession.”

The bank will also reaffirm its long-term inflation expectations, indicating that the cost of living will be much higher than the central bank’s 2% target next year.

James Smith, a developed market analyst at ING, also made a downbeat prediction for the bank’s latest economic outlook.

“The new set of forecasts, which are crucially based on market interest rate expectations, are likely to be disappointing – reflecting a deep recession in the medium term and falling below the inflation target,” he said.

“This should be read as a subtle indication that market pricing is inconsistent with achieving its inflation target.”

The decision comes after new data showed food inflation soared to a record 11.6 per cent in October, with even basics like tea bags, milk and sugar seeing significant price increases as the life crisis continued. Is.

Overall shop prices are now up 6.6 per cent from last year – also a record – but food inflation has risen from September’s 10.6 per cent and the three-month average rate of 9.7 per cent, according to the British Retail Consortium. BRC)-Nielsen Shop Price Index.

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