This interest-rate hike was all too predictable, as is the stinging pain it will inflict on borrowers and the wider economy.
asserted
it → inflict → borrowers
It will inevitably lead to higher mortgage and borrowing costs for millions, just as energy bills are rising.
asserted
bills → lead → millions
Families will be wondering what sort of Christmas they have in store – most likely a far more frugal one than they'd hoped.
asserted
they → wonder → one
And one key question is: what comes next?
asserted
what → come → ?
Is this hike from 3.75 per cent to 4 per cent the first in a series of punishing rate rises, or will it be 'one and done'?
asserted
it → do → rises
Well, the bad news is that markets are now betting on as many as three further rate rises next year, expecting the base rate to hit 4.75 per cent by late 2027.
asserted
rate → bet → 2027
Readers will be well aware of the basic rationale for raising the base rate.
asserted
Readers → raise → rate
Central banks, such as the Bank of England, America's Federal Reserve or the European Central Bank (ECB) primarily do so to try to tame the beast of inflation.
asserted
banks → do → inflation
The Bank of England's governor Andrew Bailey, pictured today, warned inflation could hit 5 per cent next year: a calamity for anyone with a mortgage or other debt
There's no doubt that price rises are out of control.
uncertain
rises → picture → control
Britain's official inflation rate has been above the Bank's 2 per cent target for two long years, ever since Rachel Reeves' miserable first Budget in October 2024, which hiked taxes by an unprecedented £40billion.
asserted
which → hike → 40billion
Officially, inflation now stands at 3.5 per cent, and with fuel prices and energy bills soaring, today the Bank's governor Andrew Bailey warned it could hit 5 per cent next year: a calamity for anyone with a mortgage or other debt.
uncertain
it → stand → mortgage
In crude terms, repeatedly hiking the base rate means people have less to spend on everything from haircuts to house extensions, so depressing demand in the economy.
asserted
people → hike → economy
This helps to slow price rises – however painfully – while also encouraging savers to squirrel more money away, as banks tend to offer them higher interest rates.
But it's also crucial to look at these rate rises in an international context.
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it → help → context
In simple terms, raising the base rate tends to make for a stronger pound, as global investors can get better returns on the international markets.
asserted
investors → raise → markets
It also sends a clear sign to the 'bond vigilantes' – who trade billions of pounds of government debt every day – that the Bank is serious about tackling inflation; even if these traders can also see that the British government is plainly unserious in its spending and borrowing plans.
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government → send → plans
This rate hike was not merely predictable, then: many City experts believe that Bailey and his committee should have acted far sooner.
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Bailey → believe → ?
After all, the Fed and the ECB have already raised rates to tackle the inflation scourge – while our sluggish central bank is only moving now.
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bank → raise → scourge
Either way, it's time for Bailey to explain what the end goal is.
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goal → explain → ?
Higher borrowing costs and mortgage rates might make life more painful, but they are not in themselves going to bring down energy bills or fuel prices.
uncertain
they → make → bills
They are not going to bring peace to the Middle East or get oil tankers sailing through the Strait of Hormuz.
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tankers → go → Hormuz
And that – as well as Labour's swingeing, socialist tax hikes hitting businesses – are the true source of our inflation problem.
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that → hit → problem
The energy price cap – what the typical household pays on gas and electricity every year – leapt from £1,663 to £1,723 in October and could well top £2,000 in January.
uncertain
household → pay → January
These are already squeezing family finances even before the Bank's Monetary Policy Committee has done their worst.
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Committee → squeeze → worst
At the same time, Labour's unionised public sector workers are currently enjoying an unaffordable, uncosted 6.3 per cent rise – just as the productive workforce who make such ministerial largesse possible are suffering.
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largesse → enjoy → rise
In short, I fear that this rate rise will not readily tackle inflation where it genuinely matters.
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it → fear → inflation
And it will only add to the woes of families up and down the land who are getting out the blankets and turning down the thermostat for what will be a long, cold winter.
asserted
what → add → thermostat
The Aporia
