The Bank of England has raised the base rate to 5.5% this afternoon – its highest point in six years.
Minutes taken during this morning’s meeting of the Monetary Policy Committee (MPC), will not be released to the public until later this month but it is widely believed that the quarter percentage point hike has been ordered in a bid to control the UK’s worrying rate of inflation.
Price growth has remained well above the government’s 2% target level this year, prompting fears that the economy was heading for meltdown.
Property investors have proved increasingly resilient in the face of higher costs of borrowing since the base rate was raised in January but today’s rate rise combined with the fall-out from the bank’s latest Financial Stability Report, casts a pessimistic shadow over the industry.
Stuart Law, Managing Director of Assetz, said: ‘It is disappointing that the Bank of England has reacted to short term data on inflation, contrary to the best interests of the economy and certainly against its stated intention of managing the economy on a long term basis.
‘Most commentators, including Mervyn King himself, acknowledge that inflation is likely to fall sharply at the end of the year. Raising rates at a time when international trade and UK economic growth are in a sensitive state may be seen with hindsight to have been a rash decision by the MPC.’