After ten consecutive base rate increases, could we finally be seeing the end of rate hikes? According to the Bank of England governor, Andrew Bailey, the UK may have that to look forward to, but cautions that the bank is eager to avoid repeating mistakes from the past, so it is not definite that they will refrain from rate hikes in the future.
This does not constitute advice and advice should be sought in all instances before acting on it.
Governor Andrew Bailey warned that Threadneedle Street still needs to assess the impact that the tighter policy would have on the economy before committing to a new strategy and that if the pressure from inflation deems it necessary, rates could rise again.
The Bank of England (BoE) is keen to avoid repeating history, referring to the period of stagflation (a time where the country experiences stagnation as well as high inflation) from the 1970s. If it looks like the nation is heading down the same path again, they won’t hesitate to raise rates higher than their current 4%.
Bailey appears to be hedging his bets as he voted for a quarter-point increase at the last meeting of the Monetary Policy Committee but has now adopted a wait-and-see approach. If the economic situation calls for another increase, as many experts are cautioning might happen, the Bank won’t hesitate to do so.
The BoE will use all incoming available to data to understand the economic big picture and will use inflation outlooks to determine their policy decisions but with the recent hard-hitting events like Brexit, COVID-19, and rising energy prices courtesy of Russia’s invasion of Ukraine, there is no easy solution to the country’s woes. Even with the recent fall of inflation to 10.1%, it is still the top concern for the British public and curbing its effects remains the Bank of England’s top priority.
For more information on UK inflation and the impact it has on your personal finances, contact your financial adviser.