The Bank of England has confirmed that interest rates will once again be going up by 0.25% taking us to 1%, however there were some among the MPC (Monetary Policy Committee) that wanted to see the interest rates increase to 1.25%.
The increase in interest rate now sees us at our highest since 2009.
Alongside the increase in interest rates we are also expecting to see the UK economy contract overall over the next 12 months.
The MPC (Monetary Policy Committee) aims to keep inflation at 2%, however prior to the war in Ukraine this had already increased to 7% as a result of the global pandemic.
Why the increase?
The increase in interest rate is due to rise in the cost of living and the intensified increase of inflation due to the ongoing war between Russia and Ukraine.
Raising interest rates is designed to, essentially, put off people and businesses from borrowing further funds which, in theory, stops prices at the supermarkets rising further.
Oil & Gas on the rise
Unfortunately with the dramatic fluctuation in oil and gas prices over the past couple of months it is likely that the rise in interest rates will do little to stem the cost of living crisis.
Petrol is now costing on average 1.62p a litre, a figure that is only set to go further as the war continues to rage in Ukraine.
Added to this the prediction that the UK economy is set to contract next year driven by both slow GDP growth and the likelihood of energy prices increasing by as much as 40% in Autumn.
Stark figures for end of 2022
By the end of 2022 inflation is expected to sore to as high as 10%, a figure well above what the MPC aim to keep inflation at.
As a result of the rise in inflation we can all expect to be paying more for our food, petrol and energy costs.
