United Kingdom Interest Rate

The Bank of England voted by a majority of 7-2 to raise interest rates by 75 bps to 3% during its November meeting, the largest rate hike since 1989, increasing the cost of borrowing to the highest level since late-2008. Policymakers voiced concerns about stubbornly high inflation, which rose back to a 40-year high in September, amid weakening economic outlook. The central bank also said further increases in Bank Rate may be required for a sustainable return of inflation to target, albeit to a peak lower than priced into financial markets. Looking ahead, GDP is projected to continue to fall throughout 2023 and 2024 H1, as high energy prices and materially tighter financial conditions weigh on spending; while CPI inflation starts to fall back from early next year, before dropping sharply to some way below the 2% target in two years’ time.