24th March 2023

Bank of England hikes rates by 0.25% but a pause may come in May

-The Bank of England has raised the base rate from 4% to 4.25%
-This is the 11th consecutive rise.
-Banking turmoil on the radar and is likely to prompt a pause in rates ahead
-Seven members of the nine-person Monetary Policy Committee supported the quarter of a percentage point increase

Susannah Streeter, head of money and markets, Hargreaves Lansdown, comments:

"A banking curve ball has been thrown into the Bank of England’s already tricky juggling act, but for now the eye of policymakers is still firmly trained on catching inflation and bringing it under control. The hotter than expected temperature of consumer prices in February, and the tight labour market are cause for concern, amid worries inflation could still become embedded in the economy. It wasn’t a unanimous decision though, with the Monetary Policy Committee split on what to do, given how rapidly the sands have been shifting. The pound has climbed higher above $1.23 adding to gains already made amid widespread expectations of this rate rise.

The knock-on effects of the banking scare are still hard to determine, and with lending criteria expected to be tightened and loans set to be harder to come by, a forecast deterioration in financial conditions is likely to be the equivalent to further interest rate rises in the months to come. Inflation was already expected to drop sharply by the end of the year to around 2.9% and if consumers and companies find it harder to access credit, it’s likely to be a fresh disinflationary force. So, in May policymakers are expected to press pause on rate hikes, as the lag effect of tightening across the economy comes into play."

Bank of Endland Trends(241 articles)
Hargreaves Lansdown Trends(131 articles)