Bank of England: ‘failing to curb the fastest inflation of any major economy’

The bank of England has yet again upped their interest rates by a quarter of a percentage point meaning mortgage and loans costs will increase for many.

Hiking rates up to 4.5% – the highest increase for almost 15 years – the Bank of England have warned it will not meet its inflation rate until 2025. A seven to two majority on the central bank’s Monetary Policy Committee said the rise was needed to bring overall inflation figures down.

The bank have recently revised their short-term inflation forecasts higher as it admitted it had previously underestimated the persistence of food price rises. Instead of inflation falling below its 2% target within a year, the bank now believes it will hit the target at the beginning of 2025.

Commenting on the news, Nigel Green, the CEO and founder of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organisations, said: ‘The Bank of England has failed households and businesses across the UK who are continuing to be punished by the central bank’s failings.

‘They failed with their inaction at the start, passively standing by for far too long last year when the UK was first coming out of Covid lockdowns, and prices were already starting to surge.

‘They’re failing again now with this latest rate hike – the 12th in a row. 

‘The Bank seems to be intent on driving the UK’s consumer-led economy into a deeper recession by continuing to make borrowing more expensive, leading to a reduction in spending and investment. Inevitably, this will trigger a further slowdown in economic activity.’

Following the announcement to continue increasing interest rates, the Bank of England now expects inflation to fall from 10.1% to 5.1% in the fourth quarter of this year – backtracking on its previous estimate of 3.9%.

Mr Green added: ‘The announcement of another hike is a further blow for UK households and business who are the ones left struggling to deal with decisions made by the Bank of England, which is still failing to curb the fastest inflation of any major economy.’

However, in light of this, the bank is still sure that the UK economy will avoid a recession relatively comfortably, theorising that by mid-2026 gross domestic product will be 2.5% larger than expected in February.

Chancellor Jeremy Hunt said it is ‘good news’ that the central bank is remaining firm on its idea that the economy will curb a recession but claimed the rise in interest rates ‘will obviously be very disappointing for families with mortgages’.

Image: Robert Bye