Should the Bank of England raise interest rates?

ended 30. January 2022

On Thursday, the Bank of England is widely expected to raise interest rates to 0.5% in order to rein in 30-year high inflation. This story will be in the news throughout the week so there are a lot of chances for media coverage. One simple question:

  • Should the Bank of England raise interest rates this week?

Please answer the question and explain your reasons why. One to two short paragraphs MAX please. If you're a Premium Newspager, your response will be edited by a seasoned journalist (note our fees are going up on Monday night!). We're going to issue your views to the local and national media tomorrow (Monday) morning sharp. 

12 responses from the Newspage community

Star Quote
"The Bank of England are walking off the hilt onto the blade of a particularly sharp double-edged sword as they try to balance the economy and a cost of living crisis, with the evils of inflation. It seems another small rise is likely, and will not have too much effect on the majority of mortgage borrowers who have long since run to the sanctuary of fixed rates. That said, it will affect future potential borrowers and is yet another slap across the face to those already facing higher energy costs, food prices and an ill-judged refusal by Government to hold back on a National Insurance rise. The problem is that another small increase is unlikely to temper inflationary pressures without a major change, and whilst rates do need to get back to some semblance of normality sooner rather than later, the public are not ready for this any time soon."
Star Quote
"The Bank of England is caught between a rock and a hard place, namely soaring inflation on the one hand and a fragile economy on the other. Rising interest rates will be painful for many households and small businesses in the short term, but run-away inflation would be far worse. The Monetary Policy Committee also has its own credibility to consider; after several false starts, the international bond market will be watching on closely; with government debt so high, the stakes couldn't be higher."
"Higher interest rates are long overdue in my opinion. The Bank of England must prevent runaway inflation at all costs. The CPI figure rose to 5.4% last month, but most economists agree the CPI doesn't truly reflect the inflation rate for the average person. The more accurate RPI figure was 7.5%. If inflation rises much higher, the impact for people on low incomes will be catastrophic, and certainly far worse than the effects of a small hike in interest rates."
"The Bank of England base rate has to be raised to a more normal level at some point, but at the moment when so many other costs are rising another hike will not be a popular decision. With the National Insurance increase likely to go ahead, energy price rises and the cost of living generally getting more expensive it makes sense for borrowers to ensure they are getting the best deals on their mortgages, credit cards and loans. Borrowers can often adjust their outgoings to make them more affordable if they are worried about their finances."
"The Bank of England has to get a grip of the raging inflation figures, which are dire. I’m confident it will raise rates to 0.5% this week but I don’t think it should; the increasing squeeze on people's pay packets makes an already bad situation worse. As the energy crisis unfolds and utility costs shoot up, along with food prices, at the same time as a tax hike has been given the green light it’s going to be an extremely difficult 12 months. Unfortunately, we’ve got a Government so preoccupied with alleged lockdown nonsense they’re asleep at the wheel of the economy, and the cliff edge that many of us have been warning about for 18 months is getting dangerously close. However, anyone worried about a housing crash can take some comfort that due to the absence of a proper housing strategy, we’ve got a chronic shortage of property that will keep prices stable. Moreover, while a rise in the base rate will inevitably feed through into mortgages and higher fixed rates, the overwhelming demand for property will keep prices buoyant and act as a buffer for any severe economic turmoil."
"The Bank of England should raise rates and it will. Central banks have been slow off the mark due to Covid but some upward motion to rates is long overdue. Care is needed, however, as we saw this week how easy it is to spook markets with significant volatility in the US. Central banks find themselves in a pickle as moving too aggressively and too quickly could mean a recession ensues . The balancing act is immense. A lot of mortgages are on fixed rates so this shouldn't have too much of an impact right now. But, rates 1% higher in a year's time could also mean some future pain for mortgage holders, especially if they have already stretched themselves to the limit."
"A Bank of England interest rate hike seems the better of two evils; it's a gamble between a higher cost of loans and mortgages, or a higher cost of everything else. The Monetary Policy Committee will be rolling the dice that a rise in interest rates will derail the runaway inflationary train that we're currently all passengers on. In theory, a higher cost of borrowing will curb spending, and thus the demand and price of goods will fall, but there is no guarantee it will work. Savers will likely be better off as it will become slightly more attractive to have money in the bank. "A rate increase to 0.5% will have a negligible impact on the housing market, which continues to be fundamentally driven by an increasing population and a lack of housing supply to match. Remortgagers who have stretched their budgets to the maximum, and are approaching the end of their fixed rate period, may be shocked to find their payments increasing. Hardest hit will be the low earners who carry a large amount of unsecured debt, such as credit cards and loans where interest rates tend to be higher, and often variable. These people will find their finances currently being battered from all angles making it very difficult to make ends meet."
"My gut feeling is no, the Bank of England shouldn't raise rates, at least not at the moment. With the National Insurance increase and the expected massive hike in fuel bills in a couple of months' time, now is not the moment to increase rates. Many people will have taken out mortgages with rates at an all-time low, to increase interest rates now when people are already being hit in the pocket will dampen consumer sentiment even further."
"The prospect of soaring inflation on top of the supremely ill-timed National Insurance hike and rising energy costs is frankly terrifying. The Bank of England needs to act immediately as a rise in interest rates is the lesser of two evils."
"Even with an interest rate rise to 0.5%, this would still be lower than before the pandemic. With inflation at a 30-year high, I think another small rise is both expected and fully justified. Inflation poses a real risk to our post-Covid economic recovery and cannot be ignored any more."
"The Bank of England is in a near impossible position and whatever it decides will cause economic pain. Financially, 2022 will prove to be the worst year ever for millions as the cost of living crisis, rising energy and fuel bills, the National Insurance increase and higher borrowing costs combine with brutal force. The pandemic may be slowly dissipating but the financial effects of it will be felt for years to come."
"The Bank of England should certainly be raising interest rates but is it enough? 0.5% is a drop in the ocean, a plaster on the broken back of the nation. With the rise in NI, an energy hike and the country facing a cost of living crisis how can we be expected to survive and grow with 0.5%. This country has put a price on something which is priceless, our mental health and well-being."