Interest rates rise again due to surprise inflation figure

The Bank of England has increased interest rates from 4% to 4.25%. It's the 11th consecutive rate increase following a surprise jump in the rate of inflation up to 10.4% in February.

Interest rates have been increased by a quarter of a percent from 4% to 4.25% today, following a surprise jump in the rate of inflation. It is the 11th consecutive time that interest rates have been increased, as the Bank of England tries to cool down the economy.

The bank's monetary policy committee has faced a balancing act between trying to control inflation whilst ensuring financial stability, in the wake of the recent upheavals in the banking sector. Despite this, the Bank of England has followed actions in the US, where the Federal Reserve raised interest rates on Wednesday.

The increase will have an immediate impact on some borrowers and savers. The cost of a variable or tracker mortgage will go up, as will the interest on other loans.

This comes on top of HMRC transaction figures this week which show an 18 per cent annual drop in UK residential sales during February. There were 76,920 sales on a non-seasonally adjusted basis: the figure is down 6.0 per cent compared with February 2019 and has never been so low during the period, based on HMRC data going back to 2014.

The interest rate is at its highest level for 14 years, rising consistently in response to the soaring cost of living. A spike in food prices, up 18.2 per cent and the highest it’s been since 1977, and higher prices in restaurants and hotels, up 12.1 per cent, means the fight against inflation is not yet over.

Although there is uncertainty over the next few months, there still remains a belief that interest rate rises may end by the middle of this year, with financial analysts expecting the rate to peak at 4.5% in the summer. The Bank of England has a delicate balancing act as it seeks to control inflation, whilst being keen not to dampen the economy, which has shown little sign of growth recently.

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