In a move to tackle soaring inflation, the Bank of England (BOE) has announced a 50 basis points increase, bringing the interest rates to five percent on Thursday. This marks the 13th rate hike by the bank and the highest level since 2008.
Andrew Bailey, the Governor of BOE, stated, “The economy is performing better than anticipated, but inflation remains excessively high and needs to be addressed.”
The BOE is committed to reducing inflation rates to the target level of two percent and is prepared to take any necessary measures to achieve this goal, Bailey added.
Financial experts are now predicting another interest rate hike before the end of the year, potentially pushing rates to a two-decade record high of six percent.
This increase in interest rates will lead to higher monthly mortgage payments, impacting approximately two million mortgage holders in the UK.
The decision by the BOE comes in response to the surging inflation rates, which unexpectedly rose by 8.7 percent in May, defying earlier forecasts and contradicting Prime Minister Rishi Sunak’s promise to reduce inflation by five percent.