Bank Of England Takes Centre Stage

by | Wednesday 15th Dec 2021 | Mortgage News

In the financial services sector, there is one burning question on everybody’s lips, will the Bank of England raise interest rates? Its not entirely unbelievable that they wouldn’t but it seems that now with inflation rising to the highest levels in 10 years, the BOE needs to do something to calm the waters.

UK inflation hit 5.1% in November this year, the highest 12-month inflation rate since September 2011, according to the latest ONS data. Economists are now nervously twiddling their thumbs as it was a general consensus that It wouldn’t rise above 4.7%. One day before the bank’s next Monetary Policy Committee meeting, the UK is waiting to see firstly if interest rates will rise and secondly, by how much.

Ed Conway in his Sky news article points out that if we were in any other time, the BOE raising interest rates would be an obvious choice as their main aim is to try and keep the consumer price index inflation as close to 2% as possible and its main way of doing this is by raising or lowering interest rates – higher interest rates means lower inflation however, the BOE has an even tougher decision this year due to the still present implications of the 2020-2021 lockdowns and the emergence of new COVID variants threatening more economy contractions. Before the new omicron variant reared it ugly head, many economists expected the BOE to raise interest rates from 0.1 to 0.25 however it has really become a guessing game now before we hear anything tomorrow.

Managing director of the IMF (international monetary fund) Kristalina Georgieva gave the BOE a damning ultimatum today insisting that a rise in rates in absolutely the right thing to do and not taking the plunge will be catastrophic for the UK economy saying: “The BOE needs to withdraw the exceptional support it has provided during 2020 and it is important to bear in mind that initial steps [to raise interest rates] would still leave policy accommodative, that changes in policy can provide important signals to dampen inflation expectations, and that policy is best focused on the period 12 to 24 months out, when it has its maximum impact (and this would be beyond near-term Covid-19 developments)”

We at Oportfolio, like many people and slightly in the dark about what the BOE are going to announce however we have always had the opinion that yes rate rises should happen to cool inflation however we do not expect them to be astronomical and we are quietly confident that the right choices will be made to get the economy back on its feet. We believe that the value of financial advisors is immeasurable and if you are concerned at all by any news that comes out of the BOE tomorrow, we are here to share our knowledge and guidance so please feel free to contact us.

Stay tuned for our updates after tomorrows Bank of England meeting.

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