Britain will endure high living costs as the Bank of England is expected to keep interest rates at painful levels. The Bank of England is expected to take this move all year as inflation pushes the economy into recession.

Bank of Britain likely to raise interest rates

There is no end in sight for Britain’s economic misery. The Bank of England (BoE) previously announced that this year would be tough as the economy is expected to fall into recession. Things have only worsened as the BoE is set to keep interest rates high.

Currently, inflation rates are spiking five times above BoE’s target levels. These developments have made Governor Andrew Bailey concerned that worker shortages could be fueling wage pressure. As such, the British market is betting on a 1-point interest rate hike this year to try and counter the inflation. 

This week’s latest British economic data report showed that wage pressure was at record levels except for right after the COVID-19 pandemic. Governor Bailey noted that he hoped the inflation would turn around soon, but the scarcity of workers seems to have fueled wage pressure.

Suppose the current trend continues; some families in Britain will have to remortgage in 2023 at much higher rates. This will squeeze them further than in 2022. As such, around 4 million might be touched by the remortgaging requirements.

Inflation persists globally

The markets have almost fully priced in a half-point increase from the Bank of England in February to 4%, the highest since the 2008 collapse. Another half-point increase by Q3 might also follow that rate hike. 

In the US, inflation rates were also high, recording over 10% in 2022. However, things are cooling down as the Federal Reserve is eyeing the reversal of rate hikes in the second half of 2023. Other countries are also recorded significantly high inflation rates globally.

Here are the top countries by inflation rates

  • Argentina – 94.8%
  • Turkey – 64.27%
  • Russia – 11.9%
  • Italy – 11.6%
  • United Kingdom – 10.5%

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