The Bank of England has imposed yet another interest rate hike today (Thursday, May 11). This is the bank’s 12th consecutive increase, in a bid to curb inflation.
Financial markets, alongside economists, expected a 0.25 percentage point rise to 4.5 percent, which was confirmed today. Back in December 2021, the Bank Rate stood at 0.1 percent. Then came a tightening cycle, to tackle the pace of price rises.
Prices initially rose due to economies getting back into gear as life got somewhat back to normal after the Coronavirus pandemic. Russia’s invasion of Ukraine just months later added to the problem, as energy prices soared.
Despite wholesale costs easing in recent months, inflation for many goods and services are still prevalent, putting financial strain on households and businesses.
The latest figures, provided by the headline consumer prices index (CPI) measure at 10.1 percent - which is ‘being fed’ highest grocery inflation for 45 years. The bank also has concerns higher-than-expected wage increases will cement inflation in the economy over the coming months.
Inflation data for April is set to strip out the effects of a leap in household energy bills which was seen in April 2022. The cost of fuel, which was also highly inflated during that time is now down on the levels seen a year ago.
Despite a rise in both fuel and household energy bills being a major part of the cost of living crisis, their prices coming down does not mean that the cost of living crisis is over.
Raising the Bank Rate, which is the bank of England’s base interest rate, is being used as a method to ease demand in the economy. It’s employed to cool activity and help inflation to ease back towards the bank’s two percent target.