Bank hikes rates sharply

The Bank of England has sanctioned another rise in interest rates to combat soaring inflation, a move which one business group described as ‘further bad news for businesses.’

On 3 November, the Bank increased its benchmark rate of interest by three quarters of a percentage point to 3%, the biggest jump since 1989. Justifying the decision, Bank Governor Andrew Bailey warned of a “tough road ahead” but said the Bank had to act forcefully now or things “will be worse later on.”

While acknowledging the Bank’s decision came as no surprise, the British Chambers of Commerce (BCC) described the rate rise as ‘a very blunt instrument to control inflation that is largely the result of global factors.’ The BCC added, ‘This is further bad news for businesses who find themselves trapped between rising costs of raw materials, energy and borrowing, and weakening consumer demand.’ The Federation of Small Businesses said the impact will be ‘felt immediately’ and warned the decision leaves ‘small businesses between a rock and a hard place.’ It added, ‘[The] rise may be seen by markets as necessary and inevitable, but for small businesses struggling under a debt burden and seeing decreases in custom that will be cold comfort.’