Interest rate hike unlikely to dampen inflation and only compound cost of living crisis, warns Scottish Friendly

17/03/2022
"Households are about to be hit by the biggest increase in living costs since the 1970s and their situation is going to be made worse by rising borrowing costs" says Scottish Friendly's Kevin Brown.

Kevin Brown, savings specialist at Scottish Friendly, comments on today’s update from the Bank of England’s Monetary Policy Committee:

“HOUSEHOLDS are about to be hit by the biggest increase in living costs since the 1970’s and their situation is going to be made worse by rising borrowing costs.

“Families are already feeling the squeeze and from next month their take-home pay is going to fall as national insurance contributions go up and new tax rules come into effect.

“On top of this, millions of people are going to have to find an extra £693 to pay for their gas and electricity. Absorbing this kind of cost while everything becomes more expensive, is going to be extremely difficult for many UK households. 

“This means many individuals may have to draw down on savings and investments, buy less than they would normally or borrow more. If more people are reliant on credit over the next six months, is now really the right time to make it more expensive?

“It’s hard to see an interest rate rise of 0.25% or even 0.5% putting any material downward pressure on inflation, given that it’s already well on course to reach 9% this year.

“The Bank of England suggested for a long time that higher inflation would be temporary, it increasingly looks like its effects on households’ finances will be much longer-lasting.”

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