Bank of England raises interest rates. Here's why

Bank of England (BoE) has hiked interest rates in order to keep inflation under control. BoE raised key interest rate by 50 bps to 4 per cent, highest since October 2008. This was also the tenth hike in a row.

The BoE has the responsibility to keep inflation under control. In December 2022, the inflation in the UK hit 10.5 per cent. BoE's Monetary Policy Committee (MPC) has the base interest rate to use as a tool to ease soaring inflation.

A hike in interest rate is perceived as a measure to keep inflation under control. Banks use base rates to decide the interest rate to charge borrowers and pay savers.

Will You Mortgage Go Up?

When BoE raises interest rates, borrowers have one question in mind whether their interest rates would go up or not.

Generally, tracker mortgage directly follows the base rate. However, fixed-term mortgage does not.

The BoE has hinted that the UK was nearing the peak interest rates. However, if the inflationary pressures persist, then the BoE may announce further hike, as per a report in Evening Standard.

FAQs:

1. What is full form BoE?
   BoE stands for Bank of England.
2. What is current inflation in UK?
   In December 2022, the inflation in the UK hit 10.5 per cent