Bank of England ‘to raise interest rates by further 0.5% next month’, poll suggests
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Bank of England ‘to raise interest rates by further 0.5% next month’, poll suggests

The Bank of England will raise interest rates by another 0.5% next month as it battles to control soaring inflation, experts have warned. 

In a poll of economists by news agency Reuters, 30 out of 51 forecast that the Bank would raise interest rates by 50 basis points to 2.25% in September. 

Another 21 economists suggested that the bank would raise interest rates by 0.25% in September – after a 0.5% raise in August

A specialist lender, Perenna, has been granted a licence by British financial regulators to offer 50-year fixed rate mortgages, the Financial Times reported. 

Inflation has reached a 40-year high of 9.4% in Britain. 

Where will interest rates be in 2023 UK?

A majority of those polled expect the Bank to pause interest rate rises in December.

Ruth Gregory at Capital Economics told Reuters, “We expect a recession in 2022/23 to be driven by high inflation, with a contraction in real consumer spending at its epicentre.

“But with household and corporate balance sheets still relatively healthy, we suspect the recession will be mild by historical standards.”

The bank expects inflation to peak at 13.3% in October. 

GDP falling in Britain

British quarterly GDP figures fell this summer for the first time since the start of 2021, shrinking in the three months to June – although the slump was less than some analysts had feared. 

GDP fell 0.1%, compared to 0.8% growth in the first three months of the year, according to official figures from the Office for National Statistics (ONS). 

In the month of June alone, output fell 0.6%.

It was the biggest contraction since January 2021 – but fell short of the 1.3% drop predicted in a poll of economists conducted by news agency Reuters. 

Companies tighten belts

In recent weeks, British companies pared back profits and earnings forecasts as consumers tightened their belts, with delivery unicorn Deliveroo (GB:ROO) cutting its revenue guidance. 

As consumers shun big-ticket purchases, furniture retailer Made.com (GB:MADE) also slashed its earnings and sales forecasts for the coming months. 

The National Institute of Economic and Social Research warned last month that the Bank of England would need to raise interest rates to 3% to bring down inflation. 


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