British Interest Rates Pushed to 4% Amid Inflation Battle

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UK ATM
Photo by Nick Pampoukidis on Unsplash

The possibility of British interest rates hitting 4% by next spring seems increasingly likely as the Bank of England continues to tighten up on its policies ahead of what is expected to be a difficult winter period, particularly as the gas crisis worsens. With inflation racing towards its fastest rise in 40 years, officials seem to be left with little option other than to send the British economy into recession.

Currently, analysts expect British interest rates to spike by 235 basis points by May next year. Should this occur, the key interest rate, currently sitting at 1.5%, would surge to 4%—more than a full percentage point over what was expected last month.

According to Citigroup Inc., consumer costs are expected to continue rising at a record pace to 18% next year. Should this projection be realized, the Bank of England’s interest rate rise will even exceed that of the U.S. Federal Reserve.

The ongoing situation is not helped by the pound’s failure to reach growth expectations, with the British currency slipping to $1.1718 on Tuesday; its weakest rate since March 2020.