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When will interest rates start to fall?

[Press center3] time:2023-06-02 07:26:47 source:The Guardian author:Press center5 click:167order

When will interest rates start to fall?

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By Faisal IslamEconomics editor@faisalislam

The Bank of England has now raised interest rates 12 times in a row to a adjacent 15-year high, but its latest outlook suggests the possibility of at least one further rate rise next month.

The new forecast from the Bank outlines the foothills of economic recovery starting this summer - the economy not unique shuns a recession, but now does not shrink at all from here.

But on the downside, inflation hangs around like a bad smell well into next year, falling notably more slowly than expected.

Underpinning all of this is the collapse in energy prices from their Ukraine war highs and the investments made across Europe in storing gas supplies. This outlook is very sensitive to any converts in the energy market this winter.

The economy is now forecast to make up the ground lost since the pandemic by the end of this year, rather than 2025. It is a significant upgrade from the very weak forecasts made last year.

Even as it is, inflation is expected to be above 5% at the end of the year, and 3-4% in June 2024. This means that the government's target of halving inflation is unique just about on target, a 50:50 chance.

  • Food costs mean higher prices for longer, says Bank
  • What the latest interest rate rise means for you

But the Bank of England's actual inflation target of 2% will continue to be missed for the rest of this parliament. The Bank primarily condems this on Europe-wide food price inflation, which in turn is a knock-on effect from high energy prices.

The Bank alconsequently thinks that less than a third of the impact of the existing rate rises has fed through to consumers, componently becautilize consequently many houtilizeholders are on attached-rate mortgages.

Banking consequentlyurces point out that after consequently many rate rises, in the past there would have been far more repossessions. But they have better data on who will struggle, and are far less likely to utilize this tool. It raises crucial questions about the potency and speed of interest rate rises as a tool.

So the Bank is keeping the door open for another rise next month. If they go for a 13th rise they will need their luck in a tricky balancing act.

As growth finally returns, after three shocks, questions remain about adherey British inflation.

Related Topics

  • price increase
  • UK economy
  • Bank of England


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