UK interest rates

The Bank of England has raised its rate for the ninth consecutive time, by 50 basis points, to 3.5 per cent per annum, according to a statement on the regulator's website.

"The Bank of England's Monetary Policy Committee (MPC) voted overwhelmingly to raise the bank rate by 0.5 percentage points, to 3.5%, at a meeting that ended on 14 December 2022. Two members opted to keep the bank rate at 3% and one chose to increase the bank rate by 0.75 percentage point, to 3.75%," the regulator said in a statement.

The Bank of England has been raising the rate continuously since December 2021. The British regulator said that if the economy develops in line with the forecasts of the November monetary policy report, further rate hikes may be needed for a sustained return of inflation to the target.

The publication of the results of the next Bank of England meeting will take place on 2 February 2023.

Also, two MPC members, LSE professors Swati Dhingra and Silvana Tenreyro, said that the cost-of-living crisis facing millions of households and rising interest rates already paving the way for higher mortgage costs means the economy will slow down without further rate hikes.

Catherine L. Mann, former chief economist at US bank Citi, believes a 0.75 percentage point increase is necessary to "reinforce the tightening cycle, which is important to counter the inflationary psychology that has been built into wage calculations and inflation expectations". It was over-voted.

The Bank of England has improved the UK GDP forecast compared to the November forecast. It now expects UK GDP to fall by 0.1% in the fourth quarter of 2022, 0.2 percentage points more than previously expected. Nevertheless, household consumption remains weak and most housing market indicators continue to decline, the regulator adds.

The UK labour market situation also remains tight although demand for labour has started to fall, the unemployment to vacancy ratio remains at a high level. Growth in regular private sector wages has also accelerated. Twelve-month inflation fell from 11.1% in October to 10.7% in November.