Some experts have predicted further rises this summer, with households wondering when they will fall
The Bank of England is expected to raise the base rate by 0.25 percent this week, the 12th consecutive increase.
The Bank of England base rate – or simply the bank rate – is set by a committee of nine members, which meets eight times per year. The group will meet again on Thursday and many economists predict a rise when their decision is published.
The base rate currently sits at 4.25 percent – the highest level in over a decade – and there is widespread belief it could increase to 4.5 percent.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics said last month that consumers should expect a hike to 4.5 percent at this month’s meeting, while economists at Capital Economics have also suggested the bank is “likely” to boost the rate to this figure.
Will interest rates rise again?
Some have warned that the Bank of England may have to raise rates again this summer, even after its predicted rise on Thursday.
Financial markets expect the central bank to deliver further increases above 4.5 percent this year. Economists at US investment bank Goldman Sachs have said they expect a “terminal” rate of 5 percent in August.
Last month, the Office for National Statistics revealed that UK inflation had fallen by less than expected in March, with the consumer prices index still sitting at 10.1 percent.
Central banks often respond to high levels of inflation by raising interest rates. This is because higher interest rates make it more expensive to borrow money, and also encourage people to save more. This lowers spending and demand for goods and services – which should lead to slower price rises.
A UK Treasury minister has said that the Government will not change the Bank of England inflation target of 2 percent, making a further rate rise more likely, given inflation is more than five times this level.
When will rates go down?
Without a crystal ball, it is impossible to say when rates will peak and when they will start going down. Some forecasts suggest that after a peak later this year, rates could slowly fall if inflation starts to stabilize. But whether this happens in practice depends on numerous factors, such as inflation dropping from current levels.
