Industry professionals continue to raise concerns
Many had expected the rate to be held this month with MPC member Swati Dhingra warning that increases risk “deepening the pain” for households. Dhingra went further saying “a prudent strategy would be to hold policy steady”.
It is thought a number of MPC members were particularly concerned about consumers sensitivity to rate movements, especially given a huge segment of UK mortgage rate holders are due to remortgage in the near future…. now at much higher borrowing costs.
Inflation continues to rise
Putting pressure on the base rate
It appears a surprise jump in inflation reported on Wednesday is to blame for the Bank’s decision to increase. Inflation surpassed its forecast level, rising from 10.1% to 10.4%, instead of the 9.9% many city analysts had been expecting.
Prices in the UK rose at a faster pace last month compared to January, due to “rising alcohol prices in pubs and restaurants following discounting in January,” Grant Fitzner, Chief Economist at the Office for National Statistics (ONS), said. Food prices have also increased more than 18 per cent over the last year, the quickest increase since records began.
Britain is now a clear outlier in the “wealthy world” as the inflation rates of most of it peers have fallen steadily since the autumn of last year. The US, for instance, has not seen an increase in inflation for the last 6 months, while inflation in the Eurozone has also been on a steady downward trajectory.