The Bank of England is expected to raise interest rates by 0.25 percentage points at its meeting on 2nd September. This would be the fifth consecutive rate hike, and would take the Bank Rate to 5.5%.
There are a number of reasons why the Bank of England is expected to raise rates in September. First, inflation is still high in the UK, at 9%. The Bank of England has a target inflation rate of 2%, and it is unlikely to be satisfied with inflation remaining so far above target.
Second, the UK economy is still growing, albeit at a slower pace than in recent years. This suggests that the Bank of England does not need to be too cautious about raising rates, and can continue to focus on bringing inflation under control.
Third, the Bank of England is likely to be concerned about the risk of stagflation. Stagflation is a situation where inflation is high and economic growth is low. The Bank of England will want to avoid this outcome, and will therefore likely continue to raise rates in an effort to bring inflation down.
Of course, there are some risks to the Bank of England’s plans to raise rates. One risk is that the UK economy could slow down more than expected, leading to a recession. Another risk is that the Bank of England could raise rates too high, and trigger a housing market crash.
However, the Bank of England is likely to be willing to take these risks in order to bring inflation under control. Inflation is a major problem for the UK economy, and the Bank of England is likely to do whatever it takes to get inflation back to target.
Arguments for:
- Inflation is still high, and the Bank of England needs to continue raising rates in order to bring it under control.
- The UK economy is still growing, and the Bank of England can raise rates without causing a recession.
- The Bank of England has a track record of raising rates until inflation is under control.
- The Bank of England is concerned about the risk of stagflation, and wants to avoid this outcome.
Arguments against:
- The UK economy could slow down more than expected, leading to a recession.
- The Bank of England could raise rates too high, and trigger a housing market crash.
- The Bank of England could lose credibility if it fails to bring inflation under control.
Overall, the Bank of England is likely to raise rates in September. The risks of not doing so are too great, and the Bank of England is likely to be willing to take these risks in order to bring inflation under control.