Barring any big surprise, the Bank of England will raise its benchmark interest rate today for the 14th consecutive time, another step in its most aggressive inflation-busting action since it gained independence from the Treasury in 1997.
Financial markets think there is a two-thirds probability of the Bank tightening rates by a quarter of a point to 5.25 per cent, the highest since early 2007. There is an outside chance that the monetary policy committee will deliver a more aggressive rise of half a percentage point, matching the decision in made in June.
Investors think this is less likely, however, as inflation data in June showed that price growth had dropped by more than expected to 7.9 per cent, and there has been growing evidence that food price inflation has peaked as energy costs have fallen. Wage growth, however, remains too high for comfort for most members of the committee.
The Bank has been raising interest rates since December 2021, when they were at an all-time low of 0.1 per cent, to return inflation to its 2 per cent target. This has increased mortgage bills, adding to the biggest squeeze on household incomes since the 1950s, and left economic growth close to zero.
The Bank’s decision will be followed by a press conference at 12.30pm from Andrew Bailey, its governor.