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Bank of England set to deliver another 0.5% rate hike next month

Bank of England to implement another 0.5% rate hike next month in its fight against inflation

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The Bank of England will raise interest rates another 0.5 percentage points next month as it ramps up its fight against inflation, experts warn.

In a further blow to households facing higher borrowing costs, a Reuters poll found that 30 out of 51 economists expect interest rates to rise from 1.75 percent to 2.25 percent in September.

The remaining 21 forecast a more modest increase from 0.25 percentage point to 2 percent. Last week, the Bank raised interest rates by 0.5 percentage point from 1.25 percent to 1.75 percent, the largest increase in 27 years.

Inflation battle: Last week, the Bank raised interest rates by 0.5 percentage point from 1.25 percent to 1.75 percent, the largest increase in 27 years.

Inflation battle: Last week, the Bank raised interest rates by 0.5 percentage point from 1.25 percent to 1.75 percent — the largest increase in 27 years.

It has raised interest rates from a record low of 0.1 percent in December while fighting runaway inflation.

Inflation hit a 40-year high of 9.4 percent in June and tomorrow’s official numbers are likely to come in close to 10 percent in July.

The Bank thinks it will exceed 13 percent this fall as utility bills soar. But there are fears that the struggle to contain inflation – and bring it back to the 2 percent target – will plunge the economy into recession, as higher interest rates weigh on spending and investment.

Official figures from last week showed the economy contracted 0.1 percent in the second quarter of the year.

A further decline in the third quarter would mean the UK is in recession.

“With growth slowing, it’s tempting to assume the Bank is considering slowing down and even cutting interest rates within a year,” said Elizabeth Martins, an economist at HSBC.

“But for now, at least the problems are driven by supply and inflation – if inflation rises further, there is a risk that the situation will only get worse.”

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