The Bank of England has raised UK interest rates by a further half percentage point to 4%, but gave its clearest signal yet that borrowing costs may now be nearing their peak.
This was the Bank’s tenth successive interest rate increase, but in the accompanying documentation, it hinted that there is a chance it might be the last for the time being, saying that it would only raise rates further “if there were to be evidence of more persistent [inflationary] pressures” than in its forecasts.
Those forecasts suggest that inflation has now peaked, and that it will come down gradually this year and next, eventually dropping beneath the Bank’s 2% target.
“I do see the signs that we’re turning a corner, and that obviously is encouraging but there’s a long way to go,” Andrew Bailey, governor of the Bank of England, told Sky News in an interview. “There’s still some very big risks out there.”
Please use Chrome browser for a more accessible video player
1:04
BoE governor explains interest rate rise
“We’re going to take it each game as it comes and look at the evidence very closely,” he added.
In raising interest rates again, the Bank pointed to wages in the private sector rising faster than anticipated.
Please use Chrome browser for a more accessible video player
0:31
Chancellor agrees on rate hike
There are widespread strikes this week in the public sector as workers fight for higher wages. Mr Bailey said the Bank would be keeping a close eye on developments in this area, as they could contribute further to inflation.
“What happens going forwards on wage setting will be very important and we’ll be watching it very closely because that will be an important indicator of whether the very sharp downward path of inflation will happen,” he said.
The Bank also upgraded its general forecast for the economy on Thursday.
Advertisement
While it still projects a technical recession this year, it would be a very shallow recession, with overall growth falling by 0.5% in 2023, compared with its November forecast of a 1.5% fall.
“If it emerges now, it’ll be the shallowest recession in a long long time,” Mr Bailey said.
Seven members of the nine-person Monetary Policy Committee supported the half percentage point increase, but two members – Swati Dhingra and Silvana Tenreyro – voted to leave borrowing costs on hold.
All were told that while the increase today is significant, the hints included in the Bank’s minutes represent a marked change in tone.
Previously it had said that it was ready to respond “forcefully” to higher inflation; this time, that language was removed.
Previously it had said further rate increases might be required if the economy behaved in line with their forecasts; this time it indicated that rate increases were dependent on higher inflation than in its forecasts.
Please use Chrome browser for a more accessible video player
1:51
Chancellor Jeremy Hunt has said the Treasury supports the Bank of England’s decision to increase the interest rate to 4%.
The shifts in language leave the door open for some small further increases in borrowing costs but provide the firmest signal yet that UK interest rates are now at, or close to, their peak.
Outlook still weaker than in recent years
Still, while the outlook for the UK economy is better than in the Bank’s previous forecasts, it is nonetheless far weaker than in recent years.
While the average UK growth rate pre-financial crisis was around 2.5% and around 1.5% post-pandemic, the Bank expects underlying growth of just 0.7% in the coming years.
Please use Chrome browser for a more accessible video player
2:42
Is Brexit to blame? The war in Ukraine? Ed Conway takes a look at why the IMF predicts the UK economy is behind any advanced nation this year
Moreover, because of the fall in national income projected this year, it now expects that the size of the economy will still be at 2019 levels in 2026 – a full seven years of lost growth.
Many other countries around the world have already exceeded their post-pandemic level; the UK, according to the Bank’s figures, is set to languish below it until the second half of this decade.
A spokesperson for the prime minister commenting on the figures said: “Inflation is the biggest threat to living standards in a generation, we support the bank’s action today. We will continue to take the decisions needed to reduce inflation.”
“This is a difficult time for mortgage holders in the UK. Inflation falling is not a given, it requires government to stick to the difficult decisions it has taken.”
On the subject of mortgage rates, Mr Bailey told Sky News that he was “hoping that we’ll see much more stability in the interest rate curve off of which mortgages are priced off.”
“That evidence is helpful, but there are a lot of people who don’t immediately benefit from that,” he added.
Footage of the moment 10-year-old Sara Sharif’s alleged killers were detained after police boarded their plane back to the UK has been played in court.
As they are approached by officers, Sara‘sstepmother Beinash Batool is heard saying: “I think you’re looking for us.”
Batool, 30, Sara’s father Urfan Sharif, 42, and uncle Faisal Malik, 29, are accused of carrying out a campaign of abuse against her culminating in her death at her family home in Surreyon 8 August last year.
The defendants, along with five of Sara’s siblings, aged between one and 13, flew to Pakistanthe following day.
Sara’s body was found by police in a bunkbed on 10 August after Sharif called police from Pakistan to say he had beaten her “too much” for being “naughty”.
A murder investigation was launched involving agencies including Interpol and the National Crime Agency to locate the defendants.
More on Sara Sharif
Related Topics:
They returned to the UK on a flight from Dubai to Gatwick Airport on 13 September.
Please use Chrome browser for a more accessible video player
2:38
‘I beat her up too much’
The clips of officers’ body-worn video shown to the jury on Friday captured the moment police boarded the plane and detained the defendants at 7.42pm, seven minutes after touchdown.
After Batool addresses the officers, Sharif, who had been sitting next to her, is asked to follow them.
The three were then taken off the plane and arrested.
A post-mortem examination established Sara had sustained extensive and significant injuries over a sustained period prior to her death.
The jury heard on Friday how concerns were raised by Sara’s school about bruising on her body in June 2022 and March 2023.
Several items seized from Sara’s home were also reviewed by the court, including a leather belt which had full DNA samples at both ends for Sara, Sharif, and Malik.
A cricket bat was also found to have Sara’s DNA profile on it, along with the DNA samples of Sharif and Malik.
Neither item had a DNA trace of Batool.
The court also reviewed the defendants’ bank accounts – both joint and separate.
All three defendants have pleaded not guilty to murder and causing or allowing the death of a child.
Six teenagers have been arrested after a 13-year-old girl was found with multiple stab wounds on a roadside near Hull.
Police said she was found around 6.50am on the A63 in Hessle with “life-threatening injuries” including “lacerations to her neck, abdomen, chest and back”.
Four boys and two girls – aged between 14 and 17 – were quickly arrested in a nearby wooded area and are being questioned on suspicion of attempted murder.
Members of the public came to the girl’s aid before emergency services arrived, Humberside Police said.
Detective Superintendent Simon Vickers said they “believe the attackers knew the victim” and the circumstances are still being investigated.
“The girl remains in hospital in critical condition and her family are being supported by officers at this difficult time,” he added.
The boys arrested are aged 14, 15, 16 and 17, and the girls 14 and 15.
Cordons are in place around a wooded area off Ferriby High Road while investigations continue.
Police said they would have an increased presence in the area over the weekend and have asked anyone with information or video to get in touch, or contact Crimestoppers anonymously.
A former soldier has told a jury his escape from Wandsworth prison to avoid being held with sex offenders and terrorists showed his “skillset”.
Daniel Khalife, 23, who was being held accused of passing secrets to Iran said he was “never a real spy” but planned a fake defection to the state following his arrest after watching American television show Homeland.
He said he wanted to be moved to a high-security unit because he was getting unwanted attention from the sex offenders on the vulnerable prisoners wing and feared a move to Belmarsh prison because, as a British soldier, terrorists wanted to kill him.
Khalife said he first wanted to “make a show” of escaping, acting suspiciously and covering himself in soot from a food delivery lorry on 21 August last year, while he was working in the prison kitchen.
He was spotted and reported to security but was “pretty shocked” when nothing happened so decided to take the “full measure,” he told the jury.
Talking about his escape for the first time at his Woolwich Crown Court trial, Khalife told how he fashioned a makeshift sling from kitchen trousers and carabiners used by inmates to keep their possessions safe from rats.
He attached it to the Bidfood lorry on 1 September last year, to see if it would be spotted by officers at Wandsworth or other prisons on the delivery route.
“I put the two carabiners and the makeshift rope underneath the lorry,” he said.
“When I had made the decision to actually leave the prison I was going to do it properly so I tested the security not just in Wandsworth
Advertisement
“Strangely, over the coming days, I could see it but it wasn’t spotted in Wandsworth or any other prison.”
Then on the morning of 6 September, Khalife said he concealed himself underneath the lorry, resting his back on the sling as the lorry was searched.
“They did normal checks around with torches but they didn’t find me. After that, a governor came to the tunnel and said, ‘Have you searched the vehicle?’
“I was facing upwards. There was action around the lorry.”
He said that when the vehicle stopped he “came out underneath the lorry and stayed in the prone position” until the lorry moved off.
Khalife, who joined the Army aged 16 and took up a post with the Royal Signals, based in Beacons barracks, Staffordshire, said he made no attempt to leave the country and had no intention to “run away” from the charges he was facing.
He was arrested three days later on the footpath of the Grand Union Canal in Northolt, west London, after a nationwide manhunt.
Asked why he had not handed himself in after his escape, Khalife said: “I was finally demonstrating what a foolish idea it was to have someone of my skillset in prison. What use was that to anyone?”
“I accept that I left the prison and didn’t have any permission to do so,” he said. “I accept absolutely that I shouldn’t have done what I did.”
Inspired by Homeland
The court has heard Khalife initiated contact with Iranian intelligence officers after he was told he could not pass developed vetting because his mother was born in Iran.
Khalife told MI5 he wanted to be a “double agent” and he said in court he thought he would be “congratulated” but described his arrest as like a “punch in the face”.
Wearing a blue checked shirt and chinos, he said police were “blinded at the prospect of a successful prosecution” but he did not think being in prison would be in “the public interest”.
“I didn’t do anything that harmed our national security. I wanted to put myself in a position where I could help my country,” he said.
“I believed I could continue my work actually located in the state – the state being Iran.”
Khalife said he took inspiration from watching Homeland, starring Claire Danes and Damian Lewis, in which Americans and terrorists go undercover, on Netflix.
“I had seen one of the characters in the programme had actually falsely defected to a particular country and utilised that position to further the national security interests of that character’s country,” he said.
“The country in question, Iran, thought it was real. She did it to further the interests of her own country.”
Khalife told jurors he is a “patriot”, adding: “I do love my country. All I wanted to do was help. I never wanted to do any harm, I never did do any harm.”
He added: “It is tragic it has come to this and I would do anything to go back to my career.”
Khalife, from Kingston, southwest London, denies a charge of committing an act prejudicial to the safety or interests of the state under the Official Secrets Act between 1 May 2019 and 6 January 2022.
He has also pleaded not guilty to a charge under the Terrorism Act of eliciting information about Armed Forces personnel on 2 August 2021, perpetrating a bomb hoax on or before 2 January 2023 and escaping from prison on 6 September last year.