Cost of living crisis: Bank of England expected to unveil biggest interest rate rise since the 1980s later today
The Bank of England is expected to unveil the biggest interest rate rise since the 1980s today.
A hike of 0.75 percentage points is anticipated – pushing the base rate to 3%, levels that have not been seen since 2008.
If confirmed, this could push up mortgage bills for millions of people in the coming months.
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This would also be the eighth time in a row that the Bank of England has hiked interest rates. Less than a year ago, the base rate was just 0.1%.
Earlier this month, the markets had predicted that today’s increase could be one whole percentage point – but sentiment has calmed since the mini-budget was reversed and Liz Truss resigned as prime minister.
The Bank of England is also set to release long-term inflation forecasts, which are expected to show that the cost of living next year will be much higher than its target of 2%.
Official figures released in September showed inflation hit 10.1% – matching a 40-year high seen in July – with much of this increase driven by rising food costs.
Through these rate hikes, the Bank of England is trying to bring core inflation under control, which excludes more volatile elements such as petrol and energy prices.
Analysts at Deutsche Bank have warned they expect the BoE’s forecasts to show “the economic outlook has deteriorated further”, adding: “Conditioned on market pricing, the UK economy will likely fall into a deeper and more prolonged recession.”
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Firms face ‘desperately difficult decisions,’ Labour warns
This afternoon, Labour’s shadow chancellor will warn that the latest interest rate rise will have a huge impact on consumers and companies alike.
Speaking at the Anthropy conference in Cornwall, Rachel Reeves will say: “Rising interest rates will mean families with already stretched budgets will be hit by higher mortgage payments. It will mean higher financing costs for businesses.
“For many firms who have had a tough couple of years, this will mean desperately difficult decisions about whether to carry on.
“And it will mean profound implications for growth as demand is sucked out of the economy – and even those firms that are keeping their head above water face difficult decisions about whether to invest or expand.”
Yesterday, a new poll carried about by Ipsos for Sky News revealed that more than a quarter of people have started using their credit cards to buy food – and a fifth have borrowed money to adjust to rising prices this year.
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US also increases interest rates
The Bank of England’s decision will come a day after America’s central bank, the Federal Reserve, also confirmed that it will increase interest rates by 0.75 percentage points.
Wall Street fell sharply when Fed Chairman Jerome Powell suggested the US base rate may need to go even higher than previously thought to tackle the worst inflation seen in decades.
He warned: “It’s very premature, in my view, to think about or to be talking about pausing our rate hikes. We have a ways to go.”
Mr Powell also said that the Federal Reserve would rather make a mistake of taking interest rates too high than easing too quickly, amid fears that a premature pullback could cause inflation to remain.
A man’s body has been recovered from an area of flooding in North Yorkshire, police have said, as major incidents have been declared in two counties.
The body was found near Intake Lane in Beal, close to Eggborough and Knottingley.
Police believe the man may have entered the water in the last 24 to 48 hours.
Follow the latest on the weather
North Yorkshire Police said: “Despite extensive enquiries, including with our colleagues in Humberside and West Yorkshire Police, we have been unable to identify him.
“He was found without any identification or personal belongings.”
The man was also described as white, in his early 50s to 60s, with light brown short hair and stubble.
He was wearing brown walking boots, blue denim jeans, a multicoloured knitted jumper and possibly a dark green waterproof coat, police added.
It comes after Leicestershire and Lincolnshire both declared a major incident in response to the extreme weather hitting the UK and Ireland.
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Leicestershire Fire and Rescue was the first emergency service in England to declare an incident and said it had received more than 200 calls since Monday morning over widespread flooding.
Crews had found cars stuck in floodwater and evacuated residents from flooded homes and rising waters, with some 17 people rescued as of 1.45pm.
The Lincolnshire Resilience Forum declared a major incident shortly after, and noted that emergency services had rescued children who were stranded at a school in Edenham.
Meanwhile, the Met Office has three yellow weather warnings – each for snow and ice – in effect throughout Monday evening and Tuesday morning.
Pic: Met Office
A warning covering the west and north coast of Scotland – reaching into Inverness and Aberdeen – will last until midday, while an alert in effect for all of Northern Ireland will last until 11am.
The Met Office has also issued a warning covering Wales and parts of northwest England on Monday evening, moving into southwest England, the Midlands and parts of southern England in the early hours of Tuesday.
On Wednesday, a yellow weather warning for snow is in effect across the south of England – stretching from just above Truro in Cornwall to Canterbury in Kent – from 9am to midnight.
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