The Bank of England has raised its interest base rate to the highest point since 2009 and warned that inflation will peak at more than 10% as the cost of living continues to soar.
The Bank’s experts set the rate at 1.25%, up from 1% previously, and the fifth increase in a row as it tries to curtail runaway inflation.
It warned prices for households across the country might increase even further than previously thought.
Three members of the bank’s nine-person monetary policy committee (MPC) called for a bigger increase to 1.5% due to worries over rocketing inflation.
“In view of continuing signs of robust cost and price pressures, including the current tightness of the labour market, and the risk that those pressures become more persistent, the committee voted to increase Bank rate by 0.25 percentage points,” it said in a notice.
The news comes as the cost of living continues to soar, with consumer prices index (CPI) inflation hitting a 40-year high of 9% in April when the energy price cap was hiked.
Experts predict that it could get worse later this year, with regulator Ofgem expected to hike up energy prices even further, from £1,971 per year to around £2,800.
Money-saving expert Martin Lewis reacted to the news on social media, saying “we’re far from the end of rate rises”.
He wrote: “The Bank of England Monetary Policy Committee voted 6 – 3 in favour of raising rates to 1.25%. The other three voted to raise it more, to 1.5%.
“That’s a strong sign we’re far from the end of rate rises.”
CAS financial health spokesperson Myles Fitt said: “So many households in Scotland are struggling to make ends meet already. With energy bills,
petrol costs and other payments higher than ever while wages stagnate, CABs are seeing increasing numbers of people who are just unable to cope.
Today’s rise in interest rates will hit such people hard, making it even harder for them to meet their daily living costs.
Governments need to recognise the scale of the crisis and make more support available to those who are struggling.”
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