Days of cheap finance are over and won’t be returning any time soon, says Bayes expert
Professor Andrew Clare comments on the Bank of England’s decision to raise rates to 5.25%
The Bank of England (BoE) has raised interest rates for the 14th successive meeting, with the Monetary Policy Committee (MPC) voting in favour of an 0.25 percentage point increase that takes rates to 5.25%.
The BoE said that they expect the UK to avoid a recession, and they have signalled that they expect rates to stay high for a long time.
“The Bank’s fight against this recent burst of inflation is coming to an end but it’s not over. The problem for the MPC is that the UK economy has become very inflation prone. We can trace at least some of this vulnerability to the tightness of the labour market, a tightness that was, at a minimum, exacerbated by Brexit.
“UK households will have to get used to higher levels of inflation and interest rates over the next few years than they have become accustomed to. The days of cheap finance are over and they won’t be returning any time soon.”