Skip to content
Search

Latest Stories

Inflation-fighting BoE poised to unleash big rate hike

Consumer prices have soared as energy costs spike on key gas and oil producer Russia’s invasion of Ukraine.

Inflation-fighting BoE poised to unleash big rate hike

The Bank of England is expected Thursday to follow other major central banks with an aggressive interest rate hike to tackle surging inflation.

The BoE is tipped to lift its main rate by 0.50 percentage points -- the biggest amount in more than a quarter of a century.


British inflation jumped to a four-decade high of 9.4 per cent in June, worsening a cost-of-living crisis as workers' wages fail to keep pace.

With inflation spiking globally following Russia's invasion of Ukraine, the US Federal Reserve and the European Central Bank sprang large hikes last month of 0.75 and 0.50 percentage points respectively.

'Up the ante'

"After the ECB and the Fed delivered oversized hikes at their July meetings, the Bank of England is likely to feel similar pressure to up the ante at its August meeting," said BNP Paribas economist Amarjot Sidhu in a note to clients.

"We expect the Monetary Policy Committee... to deliver the first 50 basis point hike since its independence and to signal its determination to prevent inflation from becoming entrenched."

The BoE, granted operational independence from the government over monetary policy in 1997, will reveal its latest rate decision at 1100 GMT on Thursday alongside its latest outlook.

Governor Andrew Bailey has already stated that a half-point hike -- which would be the biggest since 1995 -- will be "among the choices on the table" this time around.

That would take borrowing costs to 1.75 per cent, a level last seen in December 2008. Consumer prices have soared as energy costs spike on key gas and oil producer Russia's invasion of Ukraine.

Inflation has also raced higher on supply-chain woes, including labour market shortages in the wake of Brexit, and strong demand for goods and services as the Covid pandemic recedes.

Inflation 'spooks' central banks

Yet the bank predicts UK inflation will spike to 11 per cent later this year -- and it was expected to lift this guidance on Thursday.

Added to the picture, state energy regulator Ofgem is due to ramp up domestic electricity and gas prices again in October.

That could take the average UK household energy bill above £3,000 ($3,600) per year.

"Surging energy prices... will force the BoE to revise up its inflation forecast yet again," said Barclays analyst Fabrice Montagne.

"Higher inflation for even longer is the kind of scenario that spooks central banks."

The BoE's key task is to keep inflation close to a 2.0-per cent target.

Economists meanwhile argue that a large rate hike damages the nation's recovery from the coronavirus pandemic -- and risks the prospect of recession.

Rising rates inflict more misery for businesses and consumers via rising loan repayments.

"The... anticipated hike would be harmful to the economy and pile on the pain for people across the country," said Nigel Green, boss of financial consultants deVere.

The BoE has increased its key rate five times since December, lifting it to 1.25 per cent from a record-low 0.1 per cent. Until now, the BoE has not hiked its rates by more than 0.25 percentage points each time.

The soaring cost of living has dominated the race to become Britain's next prime minister. Liz Truss is currently ahead in the polls against fellow Conservative and former finance minister Rishi Sunak.

(AFP)

More For You

Sri Lanka forms committee to address UK sanctions
Anura Kumara Dissanayake

Sri Lanka forms committee to address UK sanctions

THE Sri Lanka government on Wednesday (2) formed a committee to recommend measures regarding the UK's decision to impose sanctions on three former military commanders who led the campaign that crushed the Liberation Tigers of Tamil Eelam (LTTE) in 2009.

Health minister Nalinda Jayatissa told reporters that foreign minister Vijitha Herath, justice minister Harshana Nanayakkara and deputy minister of defence Aruna Jayasekara would comprise the committee that would consult experts for the purpose.

Keep ReadingShow less
Gujarat-blast-ANI

The blast caused the factory’s concrete roof to collapse, scattering debris and body parts across the area, officials confirmed. (Photo: ANI)

ANI

Death toll rises to 21 in Gujarat firework factory explosion

AN EXPLOSION at an illegal firecracker factory in Gujarat's Deesa town killed 21 people and injured several others on Tuesday, officials said.

The blast caused the factory’s concrete roof to collapse, scattering debris and body parts across the area, officials confirmed.

Keep ReadingShow less
Child benefit payments set to rise for UK families

Child benefit, normally paid every four weeks directly into bank accounts, has undergone significant changes in recent months (Photo: Getty Images)

Child benefit payments set to rise for UK families

MILLIONS of British families are set to receive a financial boost as child benefit payments increase from April 7, according to HM Revenue and Customs (HMRC).

From next week, parents will receive £26.05 per week for the eldest or only child, amounting to £1,354.60 annually - up from the current rate of £25.60. For each additional child, payments will rise to £17.25 weekly, totalling £897 per year - an increase from the present £16.95 rate. This represents a 1.7 per cent increase across all payment categories.

Keep ReadingShow less
Anant Ambani Walks 140 Km in Spiritual Tribute on 30th Birthday

Anant’s padyatra is a reflection of the larger cultural fabric of India

Getty

Anant Ambani embarks on a 140-kilometer spiritual journey on foot to celebrate 30th birthday

Anant Ambani, a director of Reliance Industries Limited and a prominent figure in Indian industry, has chosen a unique and spiritual way to mark his 30th birthday. As part of his celebrations, he is currently undertaking a padyatra—a traditional pilgrimage on foot—from Jamnagar to Dwarka, covering a distance of approximately 140 kilometres. The journey reflects his devotion to Lord Dwarkadhish, the presiding deity of the Dwarkadhish Temple in the city of Dwarka.

Anant began his journey from his family’s residence in Moti Khavdi, Jamnagar, and has been progressing steadily for the past five days. Walking an estimated 10-12 kilometres each night, he travels under the protection of Z+ security and local police, ensuring his safety during this significant journey. The padyatra is expected to take between seven to nine days in total, with plans to conclude at the Dwarkadhish Temple in time for his birthday on April 10.

Keep ReadingShow less
New TB action plan proposed as cases surge

Government urged experts to come forward to help draw up a new five-year TB action plan. (Photo: Getty Images)

New TB action plan proposed as cases surge

BRITAIN on Wednesday (2) urged health experts and sufferers of tuberculosis (TB) to come forward to help draw up a new five-year action plan as it deals with record rises in the disease.

In 2023, England recorded its largest annual increase (11 per cent) in cases since enhanced surveillance began in 2000.

Keep ReadingShow less