Britain braces for biggest base rate rise in years: Bank of England set to move

Britain faces its biggest interest rate hike in 30 years as the Bank of England steps up its fight against inflation.

The central bank is expected to raise its key rate by 0.75 percentage points early next month.

This would be the biggest increase since Black Wednesday in 1992.

Some observers even suggest that the base rate could rise by a full percentage point to 3.25 percent on November 3.

The warnings of such a dramatic move come despite efforts by senior Bank officials to calm expectations of an aggressive rate hike.

Speaking in London on Thursday, Deputy Governor Ben Broadbent suggested the rate may not rise as far as many analysts had predicted. He warned that rates of more than 5 percent would deal a “material blow” to the economy.

Philip Shaw, chief economist at wealth management firm Investec, said Chancellor Jeremy Hunt’s decision to scrap the £32 billion tax cuts announced by his predecessor Kwasi Kwarteng and the prospect of further austerity would be a “game changer” to help keep a lid on inflation. .

That could mean rates ultimately don’t need to rise until now. Shaw said: “The peak rates may be closer to 4 per cent than 5 per cent, and if it turns out that the bank has gone too far with the increase, we could see rates come down at some stage.”

Simon French, chief economist at broker Panmure Gordon, expects rates to rise 0.75 percentage points in November and peak at 4.5 percent next year.