Bank of England set for biggest rate hike in 33 years


LONDON – The Bank of England (BoE) is widely expected to hike its key interest rate on Thursday by the biggest amount since 1989, as it bids to cool sky-high inflation in Britain.

Following a regular meeting, the BoE is seen lifting borrowing costs by 75 basis points to 3 per cent, according to market consensus, which would be the highest level since the 2008 global financial crisis.

Some analysts, however, are predicting a rise of one percentage point, also a 33-year high.

The move would mirror aggressive rate-tightening by central banks worldwide, as economies battle the highest prices in decades.

The US Federal Reserve on Wednesday announced a fourth consecutive hike of 0.75 percentage point, taking its benchmark lending rate to 3.75 to 4 per cent.

While calling further interest rate increases “appropriate” to tamp down inflation, the Fed also opened the door to smaller hikes.

The BoE decision at 1200 GMT (8pm in Singapore) is set to add to a cost-of-living crisis for millions of Britons, as hikes by central banks see retail lenders push up the rate of interest on their own loans.

Repayments on British mortgages have surged in recent weeks also, after the debt-fuelled budget of previous British prime minister Liz Truss spooked markets and forced her to resign, triggering emergency buying of British government bonds by the BoE.

Her successor, Mr Rishi Sunak, has attempted to bring calm to markets by hinting at tax rises in a fresh budget on Nov 17, even if such a move further harms Britain’s economy.

“I think everyone knows we do face a challenging economic outlook and difficult decisions will need to be made,” Mr Sunak, a former finance minister, told Parliament on Wednesday.

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British annual inflation stands above 10 per cent, the highest level in 40 years, on soaring food prices and energy bills.

Alongside its rate call, the BoE will give its latest inflation and growth forecasts, with analysts indicating that the British economy may already be in recession.

“The BoE is expected to hike its interest rate by no more than 75 basis points, on conviction that the Sunak government would opt for some fiscal austerity, and nothing too crazy to wreak havoc, again,” said Swissquote analyst Ipek Ozkardeskaya.



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