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The Bank of England raises interests rates to 4.5%

The Bank of England has raised interest rates from 4.25% to 4.5% – their highest level in 15 years.

It was the 12th consecutive rate rise by policymakers, who voted 7-2 for the increase.

It also said that it no longer expects the economy to go into recession after revising up its growth forecasts because of a sharp fall in energy prices.

The Bank also forecasts that the fall in inflation will be slower than hoped, mostly because of the ongoing rises in food prices due to the war in Ukraine. It said inflation would fall in April but is still expected to be above 5% at the end of the year and 3-4% in June 2024.

The current inflation rate is at 10.1%.

Andrew Bailey, governor at the Bank of England, also pointed to a substantial fall in energy prices, estimating that the average annual energy bill will drop to £2,100 by the end of 2023.
In addition, they forecast that annual gross domestic product (GDP) will expand by 0.25% this year., and be 2.25% points higher than expected over the next three years.

For those with a typical two-year tracker mortgage of £350,000, monthly payments will go up by nearly £50- adding around £600 per year.

The Chancellor, Jeremy Hunt, said it was good we were “no longer forecasting recession”. But added: “Today’s interest rate rise will obviously be very disappointing for families with mortgages.”

Rachel Reeves, the Shadow Chancellor, tweeted: “People will be wracked with anxiety by this news.”

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