Bank of England set to raise interest rates to 4%

The Bank of England (BoE) is expected to increase interest rates for the tenth consecutive time today, adding to growing pressure on homeowners.

It is widely expected that there will be a 0.5% increase in the central bank’s base rate to 4%, its highest level since the 2008 financial crisis.

This would be the BoE’s tenth interest rate rise in a row, since it started tightening policy in December 2021, which is a further blow to mortgage borrowers.

Matthew Ryan, head of market strategy at Ebury, said: “Since the December meeting, we think that macroeconomic news out of the UK has mixed ramifications for monetary policy though, on balance, we are pencilling in another 50bp rate increase this week.

“The focus among committee members clearly remains on inflation and, as of yet, we are yet to clear evidence of a downward trend in either the headline or core CPI measures.”

The half a percentage point hike by the BoE is unlikely to be the last in the near-term, with most economists polled by Reuters predicting one more rate rise – to 4.25% in March – while financial markets price in the tightening cycle ending in the middle of this year at 4.5%.

Threadneedle Street said late last year that Britain stood on the brink of a prolonged recession as the cost of living crisis forces households to cut back on their spending. After a surge in energy bills and the rising cost of a weekly shop, inflation reached 11.1% in October, but fell back slightly to just over 10% in December.

Economists have suggested that cooling inflation could help to ease pressure on the Bank for further rate rises. The central bank expected to be close to its peak for pushing up borrowing costs after one of the most aggressive campaigns to tackle inflation for decades.

Official figures, however, showed a stronger-than-expected performance for growth in gross domestic product in November and signs of resilience in the jobs market.

It comes as households come under growing pressure from rate increases, with as many as 2.7 million homeowners with short-term fixed-rate mortgages expected to pay at least £100 a month more to refinance their borrowing at higher rates.

Analysts said the Bank’s nine-member MPC was likely to be split today, with some members likely to push for a more muscular stance on raising interest rates than others, reflecting uncertainty about how far inflation will fall this year.

The Bank’s governor, Andrew Bailey, said earlier this month that there could be a rapid fall in inflation this year after a recent drop in wholesale energy prices, but that shortages of workers across the economy could still pose a major risk.

Economists expect the Bank to cut its forecast for inflation to finish the year at 3-4%, down from a previous forecast of 5%.

Paul Hollingsworth, chief European economist for Europe at the French bank BNP Paribas, said: “We still believe that the end of the tightening cycle is nearing. Soon, we expect the MPC to shift from increasing rates to emphasising that rates will need to stay at elevated levels for a long time in order to bring down underlying inflation.”



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  1. olddognewtricks58

    An article which is trying so hard to be positive….but still pushes a negative narrative. Dear oh dear…Let’s see how many negative news headlines appear today about the expected rate increase. Let’s be honest, most mortgage deals if not all have been priced in for this increase already. We are talking ourselves into problems….My wish for today….BE POSITIVE.

  2. AgentBen

    Likely to be raised again, it will then level off and decrease.


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