The Bank of England has revealed a 0.5 percentage point interest rate increase – its ninth consecutive rise as it maintains its battle against inflation.
The decision, by its monetary policy committee (MPC), took the bank rate to 3.5% – a fresh high not seen since the 2008 financial crisis.
The move, however, represented a slowdown on the 0.75 percentage point rise that was imposed last month after inflation had leapt to a 41-year high of 11.1% on the back of rising energy and food bills.
Thursday’s interest rate hike level was widely expected by economists and financial markets given the more recent easing in the consumer prices index (CPI) measure of inflation, to 10.7%, reported on Wednesday.
It matched the rate move announced by the US Federal Reserve on Wednesday evening while it was also followed by the European Central Bank, taking the eurozone central bank’s main deposit rate to 2% from 1.5%.
The voting on the nine-member MPC made for interesting reading as it was split three ways – with financial analysts saying that mixed messages were behind a fall in the value of the pound, by a cent against the dollar, to $1.23 (£1) after the vote.
Two backed no change while one, the economist Catherine Mann, sought a repeat of November’s hike. The rest including governor Andrew Bailey all supported the 0.5 percentage point rise.
While the latest inflation rate raised hopes that the core cost of living measure had peaked, the bank is still raising its interest rate because inflationary pressures remain in the economy despite its assertion the UK is already in recession.
Policymakers would have been concerned, for example, by separate data this week showing basic wages growing at their fastest pace since 2001, if the pandemic period is excluded.
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“The labour market remains tight and there has been evidence of inflationary pressures in domestic prices and wages that could indicate greater persistence and thus justifies a further forceful monetary policy response,” the Bank said.
Rising Bank rates however, while good for savers on paper, will only add to borrowing costs in an economy already squeezed by rising prices.
Immediate pain for some homeowners
Those on tracker or standard variable rate (SVR) mortgage deals will feel the most immediate pain.
Financial information firm Moneyfacts said a Bank rate rise of 0.5 percentage points on the current average SVR of 6.40% would add approximately £1,509 onto total repayments over two years.
The rate rise is also likely to be reflected in fixed rate deals ahead – still recovering from the temporary mini-budget market mayhem of September.
The Bank warned in its Financial Stability Report earlier this week that the average mortgage repayment was to increase by £250 a month, placing more households at risk of default next year.
Financial markets see Bank rate hitting 4.6% over the next six months.
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Hunt: Economy ‘likely to get worse’
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “This latest base rate rise will be disappointing news to borrowers who are already facing a cost of living crisis and recent turmoil surrounding mortgage interest rates.
“Consumers may breathe a sigh of relief to see fixed mortgage rates have started to drop in recent weeks and hope these rates will fall further.
“However, the cost to secure a new fixed deal is much higher than they may realise, as both the average two- and five-year fixed rates have increased by over 3% during the past year.
“The erratic behaviour in mortgage pricing makes it essential for borrowers to seek advice to scrutinise all the options available to them,” she wrote.
Chancellor Jeremy Hunt said of the Bank’s action: “High inflation, exacerbated by Putin’s war in Ukraine, continues to plague countries across the world, eating into people’s pay cheques and driving up food and energy prices.
“I know this is tough for people right now, but it is vital that we stick to our plan, working in lockstep with the Bank of England as they take action to return inflation to target.
“The sooner we grip inflation the better. Any action which risks permanently embedding high prices into our economy will only prolong the pain for everyone, stunting any prospect of economic recovery.”
The government has signalled that plans to bring a second runway at Gatwick into regular use will get the green light if environmental conditions are met.
Transport Secretary Heidi Alexander said she was “minded to approve” the airport’s plans but the deadline for a decision had now been pushed back until the end of October.
The main stumbling blocks facing Gatwick’s proposals are related to its provisions for noise prevention and public transport.
The Planning Inspectorate had made recommendations in those two areas after initially rejecting the scheme.
The airport welcomed the government’s statement but did not say whether it saw a need to adjust its plans to meet the conditions.
Gatwick has until April 24 to respond to the new proposals.
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The northern runway already exists at the airport parallel to the main one, but cannot be used at the same time as it is too close.
It is currently limited to being a taxiway and only used for take-offs and landings if the main one has to shut.
Gatwick wants to move it 12 metres further away to solve this problem.
Image: The northern runway is currently only used for emergencies or where the main one is closed. Pic: PA
It says being able to run both at the same time would allow around 100,000 more flights per year and create 14,000 jobs.
Gatwick says the £2.2bn project would not need government money, would be 100% privately funded, and could be complete by the end of the decade.
The airport is already the second busiest in the UK, and the busiest single runway airport in Europe.
Campaigners argue the additional traffic would be catastrophic for the environment and the local community in particular.
Today’s update comes after the chancellor said last month the government also supported a third runway at Heathrow as part of its wider effort to bolster UK economic growth.
However, the formal planning process is still to take place.
Gatwick’s additional runway would be unlikely to open until the end of the decade, assuming any legal challenges were swiftly overcome.
A government source told Sky News: “The transport secretary has set out a path to approving the expansion of Gatwick today following the Planning Inspectorate’s recommendation to refuse the original application.
“This is an important step forward and demonstrates that this government will stop at nothing to deliver economic growth and new infrastructure as part of our Plan for Change.
“Expansion will bring huge benefits for business and represents a victory for holidaymakers. We want to deliver this opportunity in line with our legal, environmental and climate obligations.
“We look forward to Gatwick’s response as they have indicated planes could take off from a new runway before the end of this Parliament.”
Stewart Wingate, Gatwick’s chief executive, said: “We welcome today’s announcement that the Secretary of State for Transport is minded to approve our Northern Runway plans and has outlined a clear pathway to full approval later in the year.
“It is vital that any planning conditions attached to the final approval enable us to make a decision to invest £2.2bn in this project and realise the full benefits of bringing the Northern Runway into routine use.
“We will of course engage fully in the extended process for a final decision.”
He added: “We stand ready to deliver this project which will create 14,000 jobs and generate £1bn a year in economic benefits. By increasing resilience and capacity we can support the UK’s position as a leader in global connectivity and deliver substantial trade and economic growth in the South East and more broadly.
“We have also outlined to government how we plan to grow responsibly to meet increasing passenger demand, while minimising noise and environmental impacts.”
A spokesperson for campaign group Communities Against Gatwick Noise Emissions (Cagne) responded: “We welcome the extension by the secretary of state until October as she has obviously recognised the many holes in the Gatwick airport submissions during the planning hearings.
“Cagne do not believe Gatwick has been totally up front with their submissions, and the planning hearings left so many questions unanswered.”
Greenpeace UK’s policy director, Doug Parr, said of the process ahead: “By approving Gatwick’s expansion the government will hang a millstone the size of a 747 around the country’s neck.
“Such a decision would be one that smacks of desperation, completely ignoring the solid evidence that increasing air travel won’t drive economic growth. The only thing it’s set to boost is air pollution, noise, and climate emissions.”
Prime Minister Sir Keir Starmer brushed aside growing tensions between the White House and Europe over Ukraine on Wednesday, saying he trusted Donald Trump and wanted the “special relationship” to go “from strength to strength”.
Speaking to reporters ahead of a crucial meeting at the White House, Sir Keir insisted that the UK was working “in lockstep” with the president on the matter of Ukraine.
Asked if he could trust President Trump in light of what has happened in recent weeks, the prime minister replied “yes”.
“I’ve got a good relationship with him,” Sir Keir said.
“As you know, I’ve met him, I’ve spoken to him on the phone, and this relationship between our two countries is a special relationship with a long history, forged as we fought wars together, as we traded together.
“And as I say, I want it to go from strength to strength.”
The prime minister has now arrived in Washington, but even before he touched down, the choreography of the trip hit a little turbulence as President Trump appeared to pour cold water on the prospect of a US military backstop for Ukraine as part of any peace deal – a key UK and European demand.
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Can Starmer ‘win’ in Washington?
“I’m not going to make security guarantees beyond very much,” Mr Trump said at his first cabinet meeting on Wednesday.
“We’re going to have Europe do that because Europe is the next-door neighbour.”
His remarks seemed at odds with those made by the prime minister on the way to Washington as he reiterated how important a US military backstop was for Ukraine.
“We all want a peaceful outcome,” the prime minister said.
“It’s got to be a lasting peace, and that requires us to put in place an effective security guarantee.
“Exactly what the configuration of that is, exactly what the backstop is, is obviously the subject of intense discussion.”
He added: “But the reason I say the backstop is so important is that the security guarantee has to be sufficient to deter Putin from coming again because my concern is if there is a ceasefire without a backstop, it will simply give him the opportunity to wait and to come again because his ambition in relation to Ukraine is pretty obvious, I think, for all to see.”
While European allies such as the UK and France are preparing to put peacekeeping troops on the ground to police the Ukraine-Russian borders, leaders have been clear that US support is essential to containing President Putin and securing that support is the key purpose of the prime minister’s trip to Washington.
President Zelenskyy has also demanded that clear guarantees of US military backing and security be part of his deal with the US on critical minerals, but a framework agreed this week by both sides did not include an explicit reference to any such support.
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Putin is ‘very cunning’
Ahead of the trip to Washington, the prime minister pledged to increase UK defence spending – a key ask of all NATO members by President Trump – and reiterated his commitment to putting British boots on the ground in Ukraine as he attempts to lower tensions between Europe and the US and demonstrate to President Trump that the UK is willing to play its part.
“When it comes to defence and security, we have for decades acted as a bridge because of the special relationship we have with the US and also our allegiance to our European allies,” Sir Keir said.
“I’ve been absolutely resolute that we’re not going to choose between one side of the Atlantic and the other. We will work with the US, we will work with our European allies, that’s what we’ve done for decades, and it’s what we’ll do whilst I’m prime minister.”
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Sir Keir also gave the British public a “message of reassurance” after his decision to accelerate defence spending in the face of Russian aggression, saying he had done it to “ensure their safety” and increased investment would bring opportunities.
“I want to reassure the British public that what we’re doing is to ensure their safety, their security and defence of our country.
“I want to also be clear that this is an opportunity because, as we increase defence spending, then that gives an opportunity for our industrial strategy, for jobs across the UK, good well-paid jobs in defence.”
Police searching for the body of a murder victim have found human remains in North Yorkshire.
Mother of three Rania Alayed was murdered in 2013 by her husband Ahmed al Khatib, of Gorton, Manchester, who was jailed for life the following year.
Her body was never recovered and multiple searches have taken place in the years since then, said Greater Manchester Police (GMP).
Image: Police at the scene along the A19 in Thirsk
On Tuesday, after receiving new information, GMP officers located buried human remains by the A19 in Thirsk.
The force said in a statement: “While no official identification has taken place, we strongly suspect the remains are that of Rania.
“Her family have been informed of the latest development and are being supported by specially trained officers. They remain at the forefront of our minds.”
Ms Alayed’s son, Yazan, speaking on behalf of their family, said: “The discovery of my mother’s remains more than a decade onwards has come as a surreal surprise to me and my family.
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“At last, being able to provide a final resting place is all we have wanted for the last 11 years, to have the ability to lay down a few flowers for my mother is more than I can ask for from this world.”
Detective Chief Inspector Neil Higginson, from GMP’s major incident team, said Ms Alayed’s murder was “utterly horrific” and not knowing where her body was had caused further pain to those who knew her.
“More than a decade after her murder, we now strongly believe we have located Rania’s body and are finally able to provide closure to her family, who we know have endured so much pain and grief over the years.
“Rania’s family have always been kept informed following our searches over the last few years, and we are providing them updates as we get them following this most recent development,” he said.
During Mr al Khatib’s trial, a court heard how Ms Alayed was born in Syria and met her husband when she was 15.