A sharp rise in interest rates would provide a further blow to homeowners struggling with increasing mortgage costs
The Bank of England (BoE) is facing increasing pressure to raise interest rates to 7%, according to economists. This could have a significant impact on the UK economy, as higher interest rates can affect borrowing costs and consumer spending.
The BoE has kept interest rates at 0.75% since August 2018, but economists are now warning that the Bank may be forced to increase them in order to combat rising inflation. Inflation has been steadily increasing since the start of 2019, and is now at its highest level since 2013. This means that prices are rising faster than wages, which is putting a strain on households and businesses.
The BoE has a responsibility to keep inflation in check, and economists believe that raising interest rates is the best way to do this. Higher interest rates would make it more expensive for people and businesses to borrow money, which would reduce spending and help keep inflation under control.
However, raising interest rates could also have a negative impact on the economy. Higher borrowing costs could lead to job losses, as businesses may not be able to afford to take out loans or hire new staff. It could also lead to a decrease in consumer spending, as households may not be able to afford to take out loans or buy expensive items.
The BoE will need to carefully consider the potential impacts of raising interest rates before making any decisions. If they do decide to increase rates, it is likely to be a gradual process, with the Bank likely to start by increasing them by 0.25%.
Overall, economists are warning that the Bank of England could be forced to increase interest rates to 7%, in order to combat rising inflation. This could have a significant impact on the UK economy, both positive and negative, and the BoE will need to carefully consider all the potential impacts before making any decisions.