UK central bankers have announced the biggest interest rate hike in 27 years as spiraling inflation continues to cripple the finances of millions of households.
The Bank of England raised the cost of borrowing by 50 basis points to 1.75% – the sixth The central bank has raised rates since December, following recent hikes by the European Central Bank and the Federal Reserve to rein in runaway prices.
In June, annual consumer price inflation hit a four-decade high of 9.4%, plunging millions of Britons into a cost-of-living crisis that has forced many to choose between ‘heating up’ where to eat “.
The central bank said in a press release on Thursday that inflationary pressures had “intensified significantly” in recent weeks.
“This largely reflects a near doubling of wholesale gas prices since May, due to the restriction of gas supplies from Russia to Europe and the risk of further restrictions,” he said. declared.
The Bank of England also forecast inflation to top 13% in the fall, when energy bills are expected to rise, and “to remain at very high levels for much of 2023”.
But the Resolution Foundation, a think tank, said on Wednesday it expects energy costs to push consumer price inflation past 15% next year.
Wage increases are not following. The real wages of British workers suffered their biggest drop in more than two decades between March and May, according to official data released last month.
Britons tightened their belts in response, spending less in supermarkets and ditching their streaming subscriptions.
Global natural gas prices began to rise last year as global economies reopened from pandemic shutdowns, causing demand to surge. Soaring costs fueled consumer prices.
Russia’s invasion of Ukraine in late February – and subsequent disruptions to oil and gas supplies – have only made matters worse, helping to drive fuel prices to record highs.
British households are struggling. The average annual energy bill has risen by 54% this year to £1,900 ($2,300), an almost certain further increase.
According to research firm Cornwall Insight, the average annual bill for millions of households will rise another 83% from January to £3,600 ($4,380). That’s £300 ($365) a month spent on gas and electricity.
Average UK energy bills could top £500 ($613) in January alone, according to a new report from consultancy BFY Group.
Anti-poverty activists have been sounding the alarm for months.
According to a June report by the Joseph Rowntree Foundation, about two-thirds of all low-income families have gone without essentials like heating or showers this year.
A looming recession could make matters worse, leading to a wave of job losses. Fears of an economic slowdown intensified in June when the Organization for Economic Co-operation and Development said it expected Britain’s economy to stagnate next year – the only G7 nation to do so. TO DO.