Bank official hints at significant November rate hike
bank officials

Bank official hints at significant November rate hike

Since last December, the Bank of England has been hiking interest rates to tackle inflation, taking the base rate from just 0.1% in the latter part of 2021 to 2.25% by September. The central bank has made it clear that, despite the financial woes brought about by the rate increases, it will continue to take aggressive action around tightening monetary policy. As a result, there has been a spate of 0.25% increases since last December, along with a couple of more significant 0.5% hikes.

A lot of speculation has arisen among economists and other finance industry officials regarding the level of the next rate rise in November. A recent statement from a senior bank official suggests that the November increase could be significant, which will pile further pressure on struggling households and businesses.

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According to the BoE’s Chief Economist, Huw Pill, a ‘significant’ response is necessary to control soaring inflation, suggesting the next rate rise could be a bumper one. As a result, there are expectations among economists that the central bank will increase rates by another 0.5%, which will take the base rate to 2.75%.

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Achieving the 2% inflation target

Pill was speaking at the Scottish Council for Development and Industry in Glasgow earlier this week. He discussed the importance of bringing inflation back down to the target level of 2% and hinted that the Monetary Policy Committee (MPC) would need to act aggressively at its next meeting in November to achieve this goal.

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He said: “At present, I am still inclined to believe that a significant monetary policy response will be required to the significant macro and market news of the past few weeks. But I will see when we get to November how events have evolved in the meantime.”

Pill added: “…the MPC has emphasised that its policy decisions are driven by the evolution of the data while signalling a willingness to respond more forcefully to signs of greater persistence in inflation, should that prove necessary. At every juncture, the MPC has remained committed to a medium-term view that stabilises inflation around the 2% target.”

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Difficult winter ahead for many

With the rapid increase of interest rates coupled with rocketing living costs, many households across the country are already facing a brutal winter. Energy prices increased once again at the start of October, and the cost of essentials such as food and petrol are putting additional financial pressure on household budgets.

A further hefty rate increase in November could push some people over the financial edge, leading to a rise in mortgage arrears and repossessions. However, banks are likely to have strategies to support those experiencing hardship given the current economic climate.