Bank of England Base Rate up 0.25% to 4.5%

Bank of England Base Rate up 0.25% to 4.5%

12:12 PM, 11th May 2023, About 10 months ago 3

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The Bank of England’s Monetary Policy Committee (MPC) Hawks have today voted 7 to 2 to increase the Base rate by 0.25% to the latest high since the credit crisis of 4.5% and the 12th rise in a row. The two dissenting Doves voted to keep the rate at 4.25%

This is after similar increases by the Fed and ECB so the question is, who will blink first and stop increasing rates?

With Sterling now sitting at $1.26 does the Bank still need to protect the exchange rate against Fed increase?

The MPC’s latest projection shows Bank Rate peaking at 4.75% in 2023 Q4 before ending at just over 3½% over the coming year.

The CPI inflation summary from the Bank states:

“CPI inflation is expected to fall sharply from April, in part as large rises in the price level one year ago drop out of the annual comparison. In addition, the extension in the Spring Budget of the Energy Price Guarantee and declines in wholesale energy prices will both lower the contribution from household energy bills to CPI inflation. However, food price inflation is likely to fall back more slowly than previously expected. Alongside news in other goods prices, this explains why the Committee’s modal expectation for CPI inflation now falls back more slowly than in the February Report.

“In the MPC’s latest modal projection conditioned on market interest rates, CPI inflation declines to a little above 1% at the two and three-year horizons, materially below the 2% target. This reflects the emergence of an increasing degree of economic slack and declining external pressures that are expected to reduce CPI inflation. However, there remain considerable uncertainties around the pace at which CPI inflation will return sustainably to the 2% target. The Committee continues to judge that the risks around the inflation forecast are skewed significantly to the upside, reflecting the possibility that the second-round effects of external cost shocks on inflation in wages and domestic prices may take longer to unwind than they did to emerge. The mean CPI inflation profile, which incorporates this risk, is at or just below the 2% target in the medium term.”


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Comments

GlanACC

16:32 PM, 11th May 2023, About 10 months ago

Turning the screw, will only mean BTL landlords sell up. As one of the retiring landlords who bought 20+ years ago (and now mortgage free .. gloat gloat), this interest rate is not really much of a shock, but for those that bought in recent years it could be the killer blow.

Dennis Forrest

16:52 PM, 11th May 2023, About 10 months ago

'CPI inflation is expected to fall sharply from April', so why not wait before increasing interest rates?

Landlord in Knots

17:41 PM, 11th May 2023, About 10 months ago

Perfect situation for a perfect storm. Why have the ever increased burden and stress of being a PRS landlord? What with tax regimes that target PRS landlords, licensing that is effectively taxation without representation and a whole host of other burdens and much much more to follow as we all know, EPCs to band C, abolishment of section 21s. With the BOE base rate increase to 4.5% this gives me impetus to sell more of my portfolio. Put the proceeds in the banks at 4% to 4.75% no work to do, no action to take, no defending against tenants demands (now inc mental health) sell up and relax. THE GOOD TIMES HAVE GONE. Everything has its day.

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