Bank of England hikes interest rates amid soaring inflation

The Bank of England has today (March 17) raised interest rates for the third time in a row, from 0.5 per cent to 0.75 per cent – a move that Unite has warned will further squeeze household finances for many.

The BoE’s monetary policy committee (MPC) made the decision in light of the war in Ukraine, which is expected to further push inflation to as high as 10 per cent later this year, far higher than the estimated rise to 7.25 per cent before the Russian invasion.

Eight members of the MPC voted to increase interest rates, with only one member voting against the majority to keep interest rates on hold. The latest interest rate rise comes after a previous rise in both February and December. This is the first time in more than two decades that the Bank of England has lifted interest rates in three successive meetings.

Commenting, the Bank of England said in a statement, “The economy has recently been subject to a succession of very large shocks. Russia’s invasion of Ukraine is another such shock.”

“Developments since the February report are likely to accentuate both the peak in inflation and the adverse impact on activity by intensifying the squeeze on household incomes,” the Bank noted.

“Global inflationary pressures will strengthen considerably further over coming months, while growth in economies that are net energy importers, including the UK, is likely to slow.”

More thank 2m households with mortgages will be immediately impacted by the interest rate increase, with an estimated 850,000 homeowners on types of mortgages known as tracker deals and a further 1.5m homeowners on standard variable rates (SVR) mortgages.

For those on tracker deals, their monthly mortgage payments will go up by an average of just over £25 a month after today’s interest rate hike, while those on SVR mortgages will see their monthly payments increase by nearly £16 a month, according to UK Finance. These monthly increases come on top of previous hikes after interest rate rises in December and February, further compounding the cost of living crisis for many households.

The latest interest rate hike comes as a further blow to millions of households who are already facing rising energy and other household bill costs, as well as rising fuel and food prices. It is anticipated that if energy prices continue to rise, UK energy regulator Ofgem will further increase its energy price cap in October.

In response to the cost of living crisis, Unite has made it clear that it will stand by its members by demanding wages that keep up with rising costs. The union under Unite general secretary Sharon Graham’s leadership has secured significant pay rises in dozens of workplaces across the UK in recent months.

Commenting on the Bank of England’s decision to lift UK interest rates, Unite general secretary Sharon Graham said, “Today’s interest rate rise comes at a time when millions of working people are facing the worst cost-of-living crisis for generations, now being compounded by the unfolding tragedy in Ukraine. This rise will put even more pressure on household finances as inflation and energy bills continue to skyrocket.

“My message is clear, workers must not be made to pay for this. For any bosses who think the answer to increased costs is to dip into workers’ pockets please take note: We will defend our members’ jobs, pay and conditions to the hilt and will be demanding wage rises that keep up with living costs.” 

By Hajera Blagg