Warnings that interest rates yet to peak - InterestRate.co.uk
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Warnings that interest rates yet to peak

A senior official from the Bank of England has warned that interest rates in the UK will have to rise again to try and control inflation. Despite the deep recession the nation is facing, the central bank’s Chief Economist, Huw Pill, said that there would be further rate hikes. This follows the latest bumper interest rate increase of 0.75%, which has increased the base rate to 3%.

Pill admitted that raising interest rates was a ‘difficult trade-off’ because of the economic setback it would cause. However, he also said that the central bank ‘cannot declare victory’ at this stage regarding having control of inflation. His warning will cause increased concerns for many mortgage holders across the UK who face the prospect of continued repayment rises.

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Inflation expected to have increased again

In September, inflation soared to its highest level in decades as it hit 10.1% due to rising food prices. Industry experts expect it to have increased further in October, which could mean that the Bank of England has to act even more aggressively.


At the UBS European Conference in London, Pill said: “I think we cannot declare victory against second-round effects, but we are entering a recession. It’s a difficult trade-off environment for monetary policy.”

He added: “We have done some tightening but there is more to do. That doesn’t mean we’re going to move at a pre-defined pace until kingdom comes. At some point, you have to think about what level of rate is appropriate.”

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The Governor of the Bank of England, Andrew Bailey, offered a little reassurance on the back of Pill’s warning by stating that rates will likely peak at a lower level than markets had predicted. However, this will be of little solace to those who are already struggling to keep on top of their mortgage repayments.

Increase pressure on households

Financial pressure on households has been mounting on households throughout 2022. A combination of higher food costs, rocketing energy prices, and soaring interest rates has taken its toll on household finances, with many already struggling to make ends meet.


Ongoing interest rate rises will further compound the problem, and many may find themselves pushed over the financial edge. This will inevitably significantly impact other areas, such as consumer spending, and could potentially lead to repossessions, among other things.

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Tom Hopkins, portfolio manager at BRI Wealth Management, said: “The Bank of England is raising interest rates to reduce demand for goods and services, which should in turn reduce the level of inflation.”

However, while the end goal is to bring inflation under control, the difficulties households face in the meantime could prove devastating. In addition, the nation faces the longest and deepest recession on record, according to the Bank of England.