Interest rates: Britain set for another hike from Bank of England despite inflation drop

The Bank of England is set to hike interest rates again despite the UK seeing a third consecutive month of inflation easing.

Official figures from the Office for National Statistics this morning revealed that Consumer Prices Index inflation dropped from 10.5 per cent in December to 10.1 per cent.

Experts expected it to drop to 10.3 per cent.

This is a sharp decline from October’s 11.1 per cent which was caused by a huge surge in the price of energy.

One of the Conservative Party's five aims for 2023 is to halve inflation.
Jordan Pettitt

Despite this, it is unlikely the UK will see a fall in prices as the decrease in inflation only means that prices are increasing at a slower rate.

Pay rises are also still far behind the rate of inflation, meaning UK homes will still struggle to pay for heating and eating.

The Bank of England has increased the UK’s base rate ten times in the last year in an attempt to control inflation.

As a result, interest rates have risen, benefitting savers but hindering those with debt repayments and homeowners.

The Bank is forecasting inflation to fall a further four per cent towards the end of this year.

Despite today’s good news, Britons were warned that the country is “not in a position” to stop increasing base rates.

The Bank raised interest rates from 3.5 per cent to 4 per cent in February and there was speculation that may have been the last hike due to the lower inflation outlook.

But it may look to hike interest rates again from March, from 4 per cent to 4.25 per cent.

Experts have warned that base rates could continue to rise through 2023.
John Walton

It comes as some experts revealed they believe the base rate will continue to rise throughout the rest of 2023.

Savings editor at Chip, Stephen Sillars, discussed what he called the “delicate balance” between inflation and interest rates.

“The UK needs to get a handle on inflation so it’s not really in a position to stop raising interest rates”, he told the Express.

He continued: “But, the Bank of England can’t ignore the fact this may push the economy into more of a downturn than already predicted. It’s a delicate balance.”