The Bank of England is set to make key interest rate decisions in the coming months, which will have a significant impact on UK households and businesses. Inflation remains a top concern for the UK economy, with the Consumer Prices Index (CPI) currently standing at 2.5%, above the Bank's 2% target.
According to a report by the Centre for Economics and Business Research (CEBR), a 0.25% rate hike is predicted to have a significant impact on the UK economy. This would take the base rate to 5.5%, the highest level since 2008.
The CEBR predicts that a rate hike would lead to a 1.5% increase in mortgage rates, affecting over 7 million mortgage holders in the UK. Additionally, savers would see a 1-2% increase in interest rates, although this would still be below the rate of inflation.
The impact on the FTSE 100 is also expected to be significant, with a potential 2-3% drop in stock prices. This would result in a £100 billion loss in investor value, according to the CEBR.
The Bank of England's decision will be closely watched by UK households and businesses, as well as investors. Experts predict that the Bank will aim to balance the need to control inflation with the potential impact on economic growth.
The UK economy is expected to slow down in the coming months, with a predicted 1.5% growth rate in the second quarter. This would be the lowest growth rate since 2020.