The Bank of England could push interest rates as high as 7 per cent, economists have warned, as soaring costs and borrowing mean the economy could be driven into a recession.
Interest rates rose by half a point, to 5 per cent in June meaning mortgage lenders have been increasing rates and taking away cheaper deals as the Bank attempts to bring down the highest inflation rate in the G7.
As households are faced with growing pressures from rising mortgage costs, financial markets expect the base interest rate to rise above 6 per cent before Christmas, higher than JP Morgan’s central forecast which was for rates to peak at a lower level of 5.75 per cent by November.
A recession is not off the cards as The Bank of England attempts to tackle stubbornly high inflation, however, figures suggest the UK economy has performed more strongly than anticipated in recent months.
Khalid Talukder, Co-Founder of DKK Partners commented:
“Businesses have faced turbulent times over the last few years and the aftereffects of geopolitical tensions, unpredictable market conditions and the pandemic are still presenting challenges for businesses and the UK economy. While times are tough, the government must continue focusing on removing international trade barriers and providing better access to funding for SMEs, who act as the lifeblood of our nation, if they wish to achieve the technology superpower status. Interest rates remain high, however, businesses must remain confident as they play a key role in innovation, attracting much-needed international investment and solidifying global relations.”
