The Bank of England is widely expected to increase interest rates today following yesterday’s surprise hike in inflation.
Prior to yesterday’s news, inflation appeared to be falling and some market analysts were talking down the chances of another interest rate rise.
Economists – and the Bank of England – were expecting the consumer prices index to fall from 10.1% to 9.9%, but February’s data shows the headline rate of inflation actually jumped to 10.4%, fuelled in part by a surge in food and drink prices, giving policy-makers pause for thought.
The central bank has raised the UK’s rate ten consecutive times in the past year and looks set to do so for an eleventh time today.
As it stands, the base rate is at 4% and experts suggest an increase to 4.25% is now locked in for when the Bank of England’s Monetary Policy Committee (MPC) meet this morning.
According to the Office for Budget Responsibility (OBR), inflation is expected to drop below 3% by the end of 2023.
Prime minister Rishi Sunak has previously promised to slash inflation this year in a bid to boost the economy and increase his chances of winning the next general election.
Mortgage holders, house hunters and savers will be affected if the Bank of England decides to increase the base rate.
Homeowners on Standard Variable Rates or tracker mortgages will be hit particularly hard in the short term by another interest rate increase.
During the MPC’s last meeting, they voted by a majority of 7-2 to raise interest rates by 0.5%, from 3.5% to 4%.