Bank is set to continue with rate increases
INTEREST rates are tipped to rise yet again this week while the Bank of England carries on with increases as soaring food costs keep inflation high.
Consumer Prices Inflation stayed firmly in double digits in March, further squeezing household budgets and proving more stubborn than had been anticipated.
Bank policymakers may be forced to raise rates again, from 4.25 per cent, when they meet on Thursday.
Markets expect rates to keep on rising and peak at 4.75 per cent or even 5 per cent, dashing hopes of relief for borrowers already under strain.
Analysts at Oxford Economics said they forsee another 0.25 percentage point increase on Thursday, taking the bank base rate to 4.5 per cent.
Andrew Goodwin, the firm’s chief UK economist, said: “The Monetary Policy Committee can justifiably argue that the criteria for tightening monetary policy further, that it set out in the March policy statement, have been met: the labour market is still tight and wage growth and services inflation remain stubbornly high.”
Earnings grew by 5.9 per cent in March, but wage growth is still being outstripped by soaring costs.
Job vacancies dipped but are at very high levels, the Office for National Statistics found.
The MPC’s role is to bring inflation back down to its two per cent target.
Laith Khalaf, head of investment analysis at online platform AJ Bell, said the inflationary picture was not “benign”, adding: “Everyone is expecting a rate hike from the Bank.
“Markets are then expecting one further rate hike, possibly two. The UK’s headline inflation rate is running around twice that in the US.”
The US Federal Reserve raised rates by 0.25 percentage points last Wednesday, following turmoil as a number of US regional banks failed.
The European Central Bank put through a 0.25 percentage point increase on Thursday and left the door open to further rises, with president Christine Lagarde saying “the inflation outlook continues to be too high”.