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Homeowners have been warned of two more rate hikes this summer.
Economists say the Bank of England Monetary Policy Committee was forced to raise interest rates from 4.5% in June to further reduce inflation, which fell from 10.1% in March to 8.7% in April, likely within months. He warned that the Fed could be forced to raise interest rates again. .
A drop below 10% was welcome, but lower than the city expected.
Indeed, core inflation (excluding energy, food, alcohol and tobacco) rose by 6.2% in the 12 months to April 2023, up from 6.2% in March and the highest rate since March 1992. became.
Paul Dales, UK’s chief economist at Capital Economics, added: “It is almost certain that the central bank will raise interest rates from 4.50% to 4.75% in June as inflation has turned out to be stronger than expected. It seems, maybe we can raise it a little more,” he added. A few more months later. ”
Food and non-alcoholic beverage prices continued to rise in April, at a startling 19.1%, down slightly from 19.2% in March.
James Smith, director of research at the Resolution Foundation think tank, said:
“Rising food prices are particularly painful for low-income households, with three in five already reporting having to cut back on food and other essentials.”
The official figures come a day after the International Monetary Fund warned that UK interest rates would likely need to rise further from 4.5% and “stay higher for longer” to keep inflation well under control. rice field.
The Bank of England has raised interest rates 12 times since December 2021 to curb inflation.
A typical tracker mortgage customer now pays about £417 more each month, while a variable rate customer has increased costs by £266.
Inflation slowed to 8.7% in the year to April, but was still higher than expected by some economists, according to data released Wednesday.
That has fueled expectations that borrowing costs will rise further when the Bank of England’s Monetary Policy Committee (MPC) meets in June.
“Inflation is apparently down to single digits, but not as much as expected,” said Andrew Monlake, managing director of mortgage broker Coleco.
“Furthermore, key underlying inflation turned out to be tougher than expected. This has prompted the market to react that the Bank of England may continue its policy of raising rates further into the future.”
Sushil Wadwani, a former member of the MPC and now a member of Prime Minister Jeremy Hunt’s Economic Advisory Board, said the market suggested interest rates could peak around 5.5%. .
He said many people have fixed-rate mortgages that “haven’t adjusted yet.”
“It’s an upcoming adjustment and something that’s very worrying for all of us,” he added.