The Bank of England has hiked interest rates by 0.5 percentage points taking the base rate to 4 percent. This is the tenth increase in a row plunging a pile of pressure on mortgage borrowers and the housing market.
This decision was made by the nine member Monetary Policy Committee (MPC) according to the released report on Thursday. Seven members of the MPC voted for the base interest rate from 3.5% to 4.0% whilst two members voted to keep it unchanged.
The Bank said that technically UK is in a recession but it will be shallower and shorter than predicted and gave a clear signal that borrowing costs may now be nearing there peak.
The Bank also upgraded its forecast for the economy stating that the overall growth falling by 0.5% in 2023 compared with its November forecast of a 1.5% fall.
The forecasts suggest that inflation has peaked and this year to next year will see a gradual drop and possibly lower than the Bank’s 2% target.
The Monetary Policy Committee also said there is a positive outlook for the labour market and the number of job vacancies is set to decline. The current rate of employment is expected to peak at 5.25% lower than the 6.5% that was previously
The number of job vacancies is set to decline, and redundancies will remain low, as companies are less inclined to let staff go as quickly as they did in previous recessions, the Bank suggested.
The rate of unemployment is expected to peak at 5.25 per cent, lower than the 6.5 per cent that was previously forecast.