At this point, it is no secret that England’s economy is suffering from a variety of things. Despite Theresa May’s vow to fix the housing market, there hasn’t been much to be excited about in Great Britain… besides maybe all of the NFL games in London this year. As a result, the Bank of England is considering raising the cost of borrowing for the first time since 2007. City analysts are expecting Bank of England governor Mark Carney and the monetary policy committee to vote for a rate hike on November 2.
After backing itself into a corner, the Bank of England really has no choice but to raise rates. Experts believe there is upwards of an 80% chance that the rate hike will be approved, which is not a surprise, considering the monetary policy committee hinted at a meeting in September that there could be a rate increase in the “coming months.” As a result, if the Bank were to pull back on the rate increase, it would completely undermine its credibility. It may also cause the pound to fall even further if they were to pull out.
Not Everyone Is On Board
There are plenty of risks that come with a rate increase. As the economy continues to slow in England, Carney has been warned that a rate hike may worsen things. The UK retail sector has fallen to its lowest growth rate in four years and inflation reached a five-year high in September. Ultimately, all signs are pointing to change, because it is clear that the current plan is not working. On the other hand, David Blanchflower, a former member of the Bank’s MPC, said, “This is no time for a rate rise as the economy slows.” All indications point to a rate increase, but it remains to be seen whether or not that will improve the BoE’s current conditions.