War & Militarism Morning Star
First interest rate rises in three years expected as Iran war drives high inflation
ECONOMISTS expect the Bank of England to hike interest rates for the first time in more than three years on Thursday. Traders believe its Monetary Policy Committee (MPC) will announce an increase in b
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Traders believe its Monetary Policy Committee (MPC) will announce an increase in borrowing costs from 3.75 to 4 per cent.
This would be the first time the central bank has increased borrowing costs since August 2023, and follows reports that the Bank may ease restrictions on higher-risk mortgage loans.
Inflation is expected to be pushed even further away from the Bank’s 2 per cent target rate this winter as global fuel prices remain sky-high due to the US-Israeli war on Iran.
Consumer Prices Index inflation rose to 3.5 per cent in September, the highest level in 11 months.
Ofgem’s energy price cap rose by 3.6 per cent for a typical household on October 1 and is forecast to jump by a further 22 per cent in January.
The economy, however, unexpectedly grew in August, by 0.1 per cent, suggesting resilience in Britain despite pressure on consumer spending and wider volatility because of the Iran war.
The MPC will also take into account Britain’s unemployment rate falling to the lowest level in more than a year in the three months to August, to 4.7 per cent.
The Bank is meanwhile looking at whether to increase a key lending threshold to five times borrowers’ household income, up from 4.5 times at present, in a move that could support the housing market, according to the Financial Times.
Since 2014, most banks have been prevented from offering more than 15 per cent of mortgages to borrowers above that loan-to-income level.