Bank of England raises interest rates to 5%

The Bank of England has raised interest rates by a half point to 5% as part of its efforts to combat high inflation and rising mortgage costs. This marks the 13th consecutive rate hike and the highest level since 2008. The decision comes after inflation remained unchanged at 8.7% in May, significantly above the Bank's 2% target. The central bank's monetary policy committee (MPC) has emphasized the persistence of inflationary pressures, driven by a tight labor market and resilient demand.

While the rate hike aims to address inflation, concerns have been raised about the potential impact on the economy and households. Experts warn that the aggressive approach could push the UK into a recession, as increased borrowing costs may reduce disposable income and dampen consumer demand. Critics argue that the government needs to consider the consequences for families facing soaring bills.

The decision has already led to a surge in mortgage costs, with many lenders withdrawing lower-priced deals. The cost of a typical two-year fixed-rate mortgage has exceeded 6%, reaching levels not seen since a previous economic event. The Bank of England has signaled its commitment to closely monitor inflationary risks and is prepared to further raise interest rates if necessary. However, the potential repercussions on the economy and households remain a subject of concern.

[Source: The Guardian]