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May 6, 2022

Interest rate increases to 13-year-high

Interest rates have increased to 1% from 0.75%, their highest level since 2009 and the fourth consecutive increase since December.

The Monetary Policy Summary (MPC) voted on 4 May 2022 by a majority of 6-3 to increase the rate by 0.25%.

The Bank of England said it expects the consumer price index (CPI) to rise even further over the course of the year, with inflation already hitting a 30-year-high of 7% in March this year.

The expected figures indicate CPI inflation will rise to just over 9% in Q2 and then to slightly over 10% in Q4.

It also said most members of the committee expect "some degree of further tightening in monetary policy" in the coming months.

With utility and energy bills also rising over the year, the Bank foresees further challenges to UK households. Higher taxes, energy costs and interest rates are likely to depress household spending throughout the rest of the year.

The increase in interest rates will also mean higher mortgage payments for more than two million households in the UK with variable rate mortgages. Further increases to loans will see consumers having less to spend overall.

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