- Published
Policymakers at the Bank of England are expected to keep interest rates unchanged despite price rises accelerating due to the prolonged conflict in the Middle East.
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rises → publish → East
The nine-member Monetary Policy Committee (MPC) has been meeting amid a backdrop of increasing global energy prices and interest rate rises around the world.
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Committee → meet → world
Economists expect the MPC to hold the benchmark Bank rate at 3.75% for a sixth consecutive meeting but analysts are more divided on whether the rate will need to go up before the end of the year.
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rate → expect → year
The Bank rate is crucial in setting the benchmark for banks and other lenders in setting interest for individuals and businesses borrowing and saving money.
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rate → set → money
The latest interest rate decision will be announced by the Bank at 12:00 BST on Thursday.
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decision → announce → Thursday
Following its previous meeting at the end of July, the MPC indicated it could raise the Bank rate if the Iran war escalated.
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war → follow → rate
Bank of England governor Andrew Bailey told the BBC at the time: "If we get a continuation of this conflict going on and oil prices stay above $100 a barrel... the odds are that interest rates will have to go up higher."
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rates → tell → 100
Oil prices moved above the $100 (£74) level on 9 September, and have remained there since, and there are few signs of a lasting truce in the Iran war.
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prices → move → war
The Bank uses interest rates to control inflation, which charts the rising cost of living.
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which → use → living
It aims to keep inflation at a target rate of 2%.
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It → aim → %
However, official figures released on Wednesday showed the Consumer Prices Index (CPI) measure of inflation had risen to 3.1% in August from 2.9% in July, pushing it to its highest rate in six months.
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measure → release → months
The acceleration was driven by rises in the cost of petrol, diesel and airfares.
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acceleration → drive → petrol
Economists expect that higher global energy costs will feed through to food and fuel prices paid by consumers, meaning the inflation rate is yet to peak.
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rate → expect → consumers
The MPC will be aware that, citing the Middle East conflict and warning inflation was "set to remain well above" its 2% target for some time, the European Central Bank recently raised interest rates to 2.5%.
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Bank → cite → %
In addition, the US Federal Reserve raised its interest rate to 3.5%-3.75% for similar reasons on Wednesday.
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Reserve → raise → Wednesday
However, MPC members will also be keen not to put pressure on employers and further lower the prospects for those seeking a job.
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members → put → job
Households feel the impact of a rising Bank rate through higher borrowing costs, but can benefit from more generous savings rates.
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Households → feel → rates
Given the global picture, and market expectations of a higher Bank rate, a host of major lenders have already increased the cost of new fixed-rate mortgages in recent days.
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host → give → days
Andrew Montlake, chief executive of mortgage broker Coreco, said that the latest data showed that "the inflation dragon has not been fully slain".
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dragon → say → Coreco
"If inflation proves sticky, lenders' funding costs stay under pressure, which makes cheaper mortgages harder to deliver," he said.
"
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he → prove → pressure
We are already seeing lenders reprice upwards, so this will do little to calm things down.
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this → see → things
Borrowers should not panic, but anyone approaching the end of a fixed rate should start looking early, secure an option and keep reviewing it.
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anyone → panic → it
The average two-year fixed residential mortgage rate is at its highest since 11 May, at 5.77%, while the average five-year is at its highest since 8 November 2023, at 5.83%, according to financial information service Moneyfacts.
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year → fix → Moneyfacts
Savers may be offered more generous returns, but the spending power of their savings could be eroded by the rising cost of living.
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power → offer → living
"It's almost impossible to time things just right, so I would urge households to focus on what's best for them now, in the medium term and in the longer term," said Harriet Guevara, chief savings officer at Nottingham Building Society.
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Guevara → time → Society
"For savers, regularly check that your savings are earning a competitive return and that you have the right balance between easy access and money you can afford to put away for longer."
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you → check → access
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