UK interest rates increase to 2.25%

Written by Adam Cadle

22/09/2022

The Bank of England has raised UK interest rates by 0.5 percentage points to 2.25% in an attempt to combat soaring inflation amid the cost of living crisis.

The move takes borrowing costs to their highest levels since 2008 during the global financial crisis.

Interest rates have been rising since last December as inflation has swelled to its worst level in four decades.

Adam Ruddle, chief investment officer at LV=, said: “The Bank of England’s decision to raise interest rates by 0.5% is in line with our expectations. The Bank has to strike a balance between soaring inflation and subdued economic growth, a challenge it has not faced for many years. While an increased rate helps tackle inflation it hinders economic growth. The Bank’s views on inflation have fallen as a result of the Energy Price Capping initiatives but risks have increased that inflation may remain entrenched for longer than previous expected. This likely means that interest rates will continue to rise and remain at higher levels for longer. We anticipate that interest rates will continue to rise and reach 3.75% by the end of 2023.”

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