Britain braces for higher rates as Bank of England meets

Yet prices are rising even faster. For months, higher inflation rates have raised concerns of a cost of living crisis in Britain, as hou...


Yet prices are rising even faster. For months, higher inflation rates have raised concerns of a cost of living crisis in Britain, as household budgets, especially those on lower incomes, are squeezed by higher inflation food prices for a decade, expensive energy bills and other rising costs.

For 2022, the bank’s measure of net household income after tax and inflation is expected to fall 2% from a year ago, and fall again in 2023. In November, the central bank had forecast a decline of 1. 25% for this year.

Since 1990, this measure of income has declined only twice on an annual basis, in 2008 and 2011.

Ultimately, the compression should hamper the overall economy. Gross domestic product growth is expected to ‘slow to moderate rates’ over the next few years, according to minutes of the rate-setting meeting that ended on Wednesday, with inflation in energy and goods being cited as the main reasons. The central bank also expects the unemployment rate to rise to 5%, after falling to 3.8% in the first quarter.

This economic slowdown – along with higher interest rates – is expected to bring inflation back below the central bank’s target by 2024.

Policymakers also voted on Thursday to start cutting the bank’s bond holdings, made up of £875bn of government bonds and £20bn of corporate bonds. The bank will stop reinvesting bond proceeds as the debt matures.

Interest rates are expected to rise again in “the coming months”, policymakers said. But Mr Bailey cautioned against making assumptions about the size and speed of those increases.

“We face a trade-off between high inflation and weakening growth,” he said. Given this uncertainty, he added, policymakers will “remain, needless to say, very vigilant”.

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Newsrust - US Top News: Britain braces for higher rates as Bank of England meets
Britain braces for higher rates as Bank of England meets
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