The Bank of England is reportedly anticipated to announce the largest increase in interest rates in decades. The base rate is expected to increase by 0.75% points, the largest increase since 1992, bringing it to 3%, the highest level since 2008.
If verified, this may result in an increase in mortgage payments for millions of people in upcoming months. Additionally, this would mark the Bank of England's seventh consecutive increase in interest rates. The base rate was only 0.1%, less than a year ago.
As per the sources close to the move, earlier this month, markets had anticipated that increase may be a full percentage point, but since the mini-budget was canceled and Liz Truss resigned as the prime minister of the UK, popular sentiments have subsided.
The Bank of England is also planning to publish long-term inflation estimates, which are predicted to indicate that the cost of living will exceed its target of 2% in the coming year.
According to official data issued in September, inflation reached 10.1%, matching a 40-year high reached in July. A large portion of this hike was caused by increased food prices.
With the help of these rate increases, the Bank of England is attempting to limit core inflation, which excludes more volatile components like petrol and energy prices.
According to analysts at Deutsche Bank, the estimates from the Bank of England are likely to prove that the economic prospects have worsened further and that the UK economy will likely slide into a deeper and more extended recession.
In other news, the Bank of England starts the process of selling the government debt it has been amassing over the past decade and a half in an effort to keep the economy afloat.
The Bank ultimately purchased nearly $1.1 trillion worth of government debt, with all of it financed through the creation of money, or electronically printing it.
Source credit: https://news.sky.com/story/cost-of-living-crisis-bank-of-england-expected-to-unveil-biggest-interest-rate-rise-since-the-1980s-later-today-12736927