Interest rate hits ‘shock’ 5% after 0.5 percentage point increase

Published

2 years ago

June 22, 2023

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The Bank of England has shocked economists and investors by raising interest rates half a percentage point to 5% – the highest level since 2008.

Economists had expected the Monetary Policy Committee to raise interest rates by only a quarter percentage point, but the MPC voted 7-2 for the surprise increase, explaining that it was aiming to bring higher-than-expected inflation under control.

It comes after the UK’s official inflation rate failed to fall as expected in May, staying at 8.7% – well above the bank’s 2% target.

In the minutes alongside the decision, the bank said higher inflation, especially services inflation, meant it had to act faster to bring prices under control.

However, with other major central banks around the world now slowing the pace at which they’re increasing interest rates, the move will be seen as a further sign that Britain is becoming something of an outlier.

The UK has higher inflation than any other country in the G7 and is expected to see its interest rates peak higher than other major economies.

Markets expect the bank to carry on raising borrowing costs in the coming months, with interest rates slated to peak at around 6% at the turn of the next year.

In its minutes, the bank reiterated that “If there were to be evidence of more persistent pressures [in inflation], then further tightening in monetary policy would be required.”

Two of the MPC members, Swati Dhingra and Silvana Tenreyro, voted to leave interest rates on hold at 4.5%, warning that inflation was likely to fall rapidly in the coming months, and that the full impact of higher bank interest rates had yet to be felt by the wider economy.

However the rest of the committee voted for the half percentage point increase – an increase which none of the economists recently surveyed by financial news outlets had expected.

“There had been significant upside news in recent data that indicated more persistence in the inflation process, against the background of a tight labour market and continued resilience in demand,” the minutes said.

Some will ask, however, whether this faster-than-expected increase will raise the chances of the UK tipping into recession in the coming months.

The Bank has yet to update its own forecasts to reflect this – that will happen next month.

Mortgage pain

Today’s announcement paves the way for more expensive mortgage bills.

Anyone with a tracker mortgage will feel the effect of rises immediately as their mortgage rate is tied to the bank’s base rate.

For those moving to a fixed rate mortgage they may already have had to sign on to a more costly deal.

Shadow chancellor Rachel Reeves accused Jeremy Hunt and Rishi Sunak of “burying their heads in the sand” about the mortgage misery facing householders.

“Families across Britain will be desperately worried about what today’s interest rate rise might mean for them,” she said.

“They want to know that support will be there if they need it.

“Instead, the Chancellor and Prime Minister are burying their heads in the sand and failing to clean up the mess this Tory government has made.”

Government reaction

Chancellor Jeremy Hunt said. “High inflation is a destabilising force eating into pay cheques and slowing growth.”

“Core inflation is higher in 14 EU countries and interest rates are rising around the world, but the lesson from other countries is that if you stick to your guns, you bring inflation down.

“Our resolve to do this is watertight because it is the only long-term way to relieve pressure on families with mortgages. If we don’t act now, it will be worse later”.

Business

Bodycare to close 56 remaining stores – with nearly 450 to be made redundant

Published

10 hours ago

September 22, 2025

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Bodycare to close 56 remaining stores - with nearly 450 to be made redundant

High Street beauty chain Bodycare is to close its 56 remaining stores, resulting in 444 redundancies, administrators have said.

Last week it announced the closure of 30 shops, having collapsed into administration earlier this month.

A shortage of stock and the cost of running stores meant it was no longer viable to keep its 115 stores open, administrators said at the time.

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Business

Trump reveals Rupert and Lachlan Murdoch could be involved in TikTok deal

Published

19 hours ago

September 22, 2025

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Trump reveals Rupert and Lachlan Murdoch could be involved in TikTok deal

Donald Trump has revealed that media mogul Rupert Murdoch and his son Lachlan could be part of a deal in which TikTok in the United States will come under American control.

The US president also namedropped Michael Dell, the founder and CEO of Dell Technologies, as a possible participant in the deal during an interview with Fox News, which is owned by the Murdochs.

“I think they’re going to be in the group. A couple of others. Really great people, very prominent people,” Mr Trump said. “And they’re also American patriots, you know, they love this country. I think they’re going to do a really good job.”

Mr Trump said that Larry Ellison, founder and CEO of software firm Oracle, was part of the same group. His involvement in the potential TikTok deal had previously been revealed.

White House press secretary Karoline Leavitt said on Saturday that Oracle would be responsible for the app’s data and security, with Americans set to control six of the seven seats for a planned TikTok board.

This comes after Mr Trump said he and China’s Xi Jinping held a “very productive call” on Friday, discussing the final approval for the TikTok deal, much of which is still unknown.

Once confirmed, the deal should stop TikTok from being banned in the US after lawmakers decided it posed a security risk to citizens’ data.

Officials warned that the algorithm TikTok uses is vulnerable to manipulation by Chinese authorities, who can use it to push specific content on the social media platform in a way that is difficult to detect.

Congress had ordered the app shut down for American users by January 2025 if its Chinese owner ByteDance didn’t sell its assets in the country – but the ban has been delayed four times by President Trump.

Mr Trump said on Sunday that he might be “a little prejudiced” about TikTok, after telling reporters on Friday: “I wasn’t a fan of TikTok and then I got to use it and then I became a fan and it helped me win an election in a landslide.”

After the call with Mr Xi, Mr Trump said in a Truth Social post: “We made progress on many very important issues, including Trade, Fentanyl, the need to bring the War between Russia and Ukraine to an end, and the approval of the TikTok Deal.”

Mr Trump later told reporters at the White House that Xi had approved the deal, but said it still needed to be signed.

Representatives for the Murdochs, Mr Dell and Mr Ellison have not yet commented on a potential TikTok deal.

Business

Gatwick second runway given green light by government

Published

19 hours ago

September 22, 2025

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Gatwick second runway given green light by government

Gatwick’s second runway has been given the go-ahead by the government.

The northern runway already exists parallel to Gatwick‘s main one, but cannot be used at the same time, as it is too close.

It is currently limited to being a taxiway and is only used for take-offs and landings if the main one has to shut.

The £2.2bn expansion project will see it move 12 metres north so both can operate simultaneously, facilitating 100,000 extra flights a year, 14,000 jobs, and £1bn a year for the economy.

It would also mean the airport could process 75 million passengers a year by the late 2030s.

Gatwick is already the second busiest airport in the UK, and the busiest single runway airport in Europe.

No public money is being used for the expansion plan, which airport bosses say could see the new runway operational by 2029.

The expansion was initially rejected by the Planning Inspectorate over concerns about its provisions for noise prevention and public transport connections.

Campaigners also argued the additional air traffic will be catastrophic for the environment and the local community.

A revised plan was published by the planning authority earlier this year, which it said could be approved by the government if all conditions were met.

The government says it is now satisfied this is the case, with additions made including Gatwick being able to set its own target for passengers who travel to the airport by public transport – instead of a statutory one.

Nearby residents affected by noise will also be able to charge the airport for the cost of triple-glazed windows.

And people who live directly under the flight path who choose to sell their homes could have their stamp duty and estate agent fees paid for up to 1% of the purchase price.

CAGNE, an aviation and environmental group in Sussex, Surrey, and Kent, says it still has concerns about noise, housing provision, and wastewaster treatment.

The group says it will lodge a judicial review, which will be funded by local residents and environmental organisations.

‘Disaster for the climate crisis’

Green Party leader Zack Polanski criticised the second runway decision, posting on X: “Aviation expansion is a disaster for the climate crisis.

“Anyone who’s been paying any attention to this shambles of a Labour Govenrment (sic) knows they don’t care about people in poverty, don’t care about nature nor for the planet. Just big business & their own interests.”

Friends of the Earth claimed the economic case for the airport expansion has been “massively overstated”.

Head of campaigns Rosie Downes warned: “If we’re to meet our legally-binding climate targets, today’s decision also makes it much harder for the government to approve expansion at Heathrow.”

Shadow transport secretary Richard Holden welcomed the decision but said it “should have been made months ago”, claiming Labour have “dithered and delayed at every turn”.

“Now that Gatwick’s second runway has been approved, it’s crucial Labour ensures this infrastructure helps drive the economic growth our country needs,” he said.

A government source told Sky News the second runway is a “no-brainer for growth”.

“The transport secretary has cleared Gatwick expansion for take-off,” they said. “It is possible that planes could be taking off from a new full runway at Gatwick before the next general election.

“Any airport expansion must be delivered in line with our legally binding climate change commitments and meet strict environmental requirements.”