UK interest rates are heading towards the 2008 record

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UK interest rates are heading towards the 2008 record

Following the US central bank, the Bank of England (BoE) also raises interest rates by 25 basis points. This brings the British interest rate to 4.25 percent: a quarter of a percentage point less than the record interest rate during the financial crisis of 2008.

Analysts had actually expected UK interest rates to remain unchanged. But after the dramatic news that inflation had risen sharply against expectations in February, things changed. RaboResearch economist Stefan Koopman explains that the banking crisis actually led analysts to believe that interest rates would remain the same. Investors therefore thought that the central bank might be marking time. But because of the new inflation figures, everyone came to the conclusion that there was no other option than an interest rate increase.’

‘Outlooks can change’

However, the situation can also change quickly, the economist warns. Two weeks ago, Fed boss Jerome Powell opened the door to a rate hike of 50 basis points. Less than a day later, trouble broke out at Silicon Valley Bank.’ Partly because of this, many economists have questioned the ambitious rate hike. ‘Then the question arose whether interest rates could be raised at all. This shows that we are in a time of high financial uncertainty, in which the outlook can change from one day to the next.’

Continued high inflation means further interest rate hikes are still on the table, say BoE bankers.

The front view of the Bank of England, the British central bank. (ANP / Alamy Limited)

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