The Bank of England is expected to hike its benchmark interest rate on Thursday by the largest amount since 1989 in an effort to lower the country’s sky-high inflation rate.
According to market consensus, the BoE is expected to raise borrowing costs by 0.75 percentage points to three percent during a regular meeting. This would be the highest level since the global financial crisis of 2008.
However, some analysts are forecasting an increase of one percentage point, which would also be a 33-year high.
In response to the highest prices in decades, central banks around the world have been aggressively tightening interest rates.
Ahead of the UK decision, the London stock market opened substantially lower after the US Federal Reserve sprung a fourth consecutive boost of 0.75 percentage points, and its chief Jerome Powell signaled they would go higher than expected.
Millions of Britons are expected to experience a worsening cost-of-living crisis as a result of the BoE rate call, which is scheduled for 1200 GMT. Retail lenders will see their own interest rates rise as a result of central bank rate hikes.
“The Bank of England will likely join the Fed in raising rates by 75 basis points,” Oanda analyst Craig Erlam said.
“The central bank has had the unenviable job of fighting soaring inflation amid enormous economic and political uncertainty.”
Mortgage payments in the UK have increased recently as a result of the BoE’s emergency purchase of UK government bonds and the former British prime minister Liz Truss’ debt-fueled budget, which alarmed the markets and forced her resignation.
Rishi Sunak, her replacement, has made an effort to soothe the market by suggesting tax increases in a new budget to be released on November 17, even though doing so would be detrimental to the British economy.
“I think everyone knows we do face a challenging economic outlook and difficult decisions will need to be made,” Sunak told parliament on Wednesday.
Due to recent rising food and energy prices, annual inflation in Britain has reached a 40-year high of almost 10%.
The BoE will also present its most recent projections for inflation and growth, and analysts believe that the UK economy may already be in a recession.
“The Bank of England is expected to hike its interest rate by no more than 75 basis points, on conviction that the Sunak government would opt for some fiscal austerity, and nothing too crazy to wreak havoc, again,” Ipek Ozkardeskaya, Swissquote analyst, forecasts.
