Few levers available to Bank than to increase rates - Rob Clifford, Stonebridge, BBR rate increase comment

23 March 2023

“Once it was revealed this week that inflation had risen to 10.4% in February, followed by the Fed’s decision to raise rates yesterday in the US, it seemed like a racing certainty the MPC would have to act today with a further Bank Base Rate rise. The markets have already been reacting to that news with swap rates increasing, and by this morning that rate rise already seemed priced in. Clearly those borrowers on tracker rates will feel this rise immediately, however some lenders have been reducing fixed-rates this week, and my feeling is that the search for business – particularly from the mainstream, high-street lenders – will continue to keep mortgage rates round about where they are. This makes it even more attractive and indeed necessary for consumers to seek expert mortgage advice and mortgage advisers come into their own when lending criteria and product pricing are more complicated than usual. As we know, the Bank of England has few levers it can pull in terms of trying to bring inflation down, and thestubborn nature of inflation evidenced by this week’s figures, meant this was a decision it probably felt it had no option to make. We already seem like a long way from last week’s OBR forecast for inflation to be 2.9% by the end of the year, and we will need to see some sharp falls in inflation in the months ahead, before there is any thought of Bank Base Rate being cut.”