Bank of England interest rate hike remains a concern, but there are glimmers of hope for the future

Whisper it softly, but there were some hidden glimmers of hope in the Bank of England’s latest interest rate decision.

Don’t get me wrong: there was a lot in there that will continue to worry households – especially those with mortgages.

The BankThe monetary policy committee voted for raise its official interest rate by another half a percentage point to 3.5%. It’s the ninth consecutive raise – one at each meeting since this time last year – and it won’t be the last.

The committee said that “if the economy evolves broadly in line with projections in the November Monetary Policy Report, further increases in the Bank Rate may be needed for a sustained return of inflation to target.”

Additionally, while two members of the nine-person committee voted for no raise, another member, Catherine Mann, voted for an even bigger raise, up 0.75 percentage points.

It is worth taking a step back to consider how drastically this has changed monetary policy.

Yes, interest rates have been higher than that – as recently as 2008. But since 1989, interest rates haven’t risen that much in a single year. And given that households with mortgages today are considerably more indebted than they were then, the net effect of these changes could be even more difficult.

That being said, as the Bank’s own analysis showed earlier this week, there are fewer and fewer households with these mortgages. It will be very difficult for some, but not for everyone.

And the year ahead is clouded with uncertainty. Given the main thing to push inflation has been the price of energy and given that no one knows what Vladimir Putin will do next, trying to predict the future remains particularly difficult.

But that’s where the glimmers – or rather the glimmers – of hope come in.

• The first is that inflation seems to have peaked (given these reserves). The Bank of England is not the only central bank to slow its pace of rate hikes; the Federal Reserve did the exact same thing yesterdayraising US rates by half a percentage point.

• Second, the Bank believes that the extension of the energy price guarantee should help reduce inflation next year, which means that it may not need to raise interest rates. interest as much as she would have done.

• Third, the economy is actually doing a little better (or rather, less badly) than previously expected. Yes, we are probably still in a recession. But in the third quarter, gross domestic product contracted by 0.2% (the Bank was expecting -0.5%). In the fourth quarter, he previously expected a decline of 0.3%, but he now thinks -0.1% seems more likely.

It’s hard to consider this as good news, but maybe together they could be a ray of light somewhere at the end of the tunnel.

Inflation peaks…surprising growth on the upside…It may not be the joy of Christmas in its own right, but after the year we’ve just had, it’s better than nothing.

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