The UK’s higher-than-expected inflation figure has prompted speculation that the Bank of England might further increase interest rates, potentially further impacting already squeezed personal finances.
Inflation fell to 10.1% in March from 10.4% in February, but economists had anticipated a lower figure of 9.8%.
While the base rate has risen from a record low of 0.1% in December 2021 to 4.25% today as the Bank of England attempts to grapple with the ongoing cost-of-living crisis.
Laith Khalaf, head of investment analysis at AJ Bell, said: “The market is now anticipating three interest rate rises this year, which would take the Bank of England’s base rate to 5%.”
Khalaf notes that this change in sentiment could affect a wide range of personal finance matters, from mortgages to businesses and Government finances.
But Khalaf warns that predicting the Bank of England’s interest rate decisions is challenging, and expectations for three more rate hikes this year might be an overreaction to one month’s CPI reading.
He added: “Inflation might be proving stickier than anticipated, but the market is still counting a lot of chickens before they’re hatched.”
The next interest rates announcement is scheduled for 11th May.
