HSBC

Spooked in Threadneedle Street – UK inflation and interest rates

Spooked in Threadneedle Street – UK inflation and interest rates
Latest HSBC Economic commentary

Key points

  • On 16December, the Bank of England announced an increase in UK Bank Rate from 0.10% to 0.25%, only the third time it has raised interest rates since the global financial crisis.

  • The catalyst for this decision was the acceleration of inflation in recent months, with both the Bank of England and HSBC expecting the annual CPI rate to reach 6% in April 2022.

  • HSBC anticipates three more rate hikes during 2022, which will take Bank Rate to 1.00% in August. But there are clear upside risks to this forecast so that borrowers should be prepared for the eventuality that 1.00% is not the peak of the cycle, especially if inflation fails to ebb as quickly as expected after the spring peak.

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