Britain’s economic backdrop provides an opportunity for the chancellor to show some economic compassion and offset central bank hawkishness
Chancellor of the exchequer Rishi Sunak. Picture: REUTERS/STEFAN ROUSSEAU
The UK central bank was obliged to push up borrowing costs this week, or risk accusations that it was reneging on its remit to keep inflation in check. With consumer prices rising at their fastest pace in 30 years and the inflation rate expected to peak at close to 10% this year, a further increase in the official interest rate to 0.75% was clearly warranted.
The Bank of England action heralds more pain for cash-strapped UK consumers. Mortgage lenders have been jacking up the rates on home loans to reflect the increase in official interest rates. The interest payable on a two-year, fixed-rate package — the most common product for UK borrowers — has already climbed more than 55 basis points since September. The futures market anticipates a central bank rate of about 2% by the end of the year, heralding higher housing costs.
And surging energy prices are hurting drivers. UK petrol pump prices posted their biggest increase on record in the week through March 14, Bloomberg News reported this week. The 4.6% jump was the most since records began in 2003.
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