Earlier last week, we saw the Bank of England raise interest rates back to pre-pandemic levels of 0.75, the third time since December the Bank’s Monetary Policy Committee (MPC) has increased the cost of borrowing, as they try to contain the UK’s inflation rate, which is looking to rise to 8%.
Threadneedle Street’s monetary policy committee (MPC) voted 8-1 to increase borrowing costs by 0.25 percentage points – the first time the Bank has raised rates at three successive meetings in more than two decades.
The MPC first increased rates from record lows of 0.1% to 0.25% in December. It then doubled the rate to 0.5% in February. These increases have seen an intensifying squeeze on many household incomes.
As part of their announcement the Bank of England also further condemned Russia’s invasion of Ukraine, saying: “The Bank of England condemns Russia’s unprovoked invasion and the suffering inflicted on Ukraine. The Bank is working closely with the UK Government to support its response in coordination with international authorities. The Bank’s Monetary Policy Committee supports this condemnation and welcomes these actions.”
Russia’s war on Ukraine has seemed to be causing the rise in inflation, with fears that the longer the invasion goes on the higher energy prices will rise as a result of the escalation in gas and oil prices.
Following on from this, on Wednesday 23rd March 2022, we saw Chancellor Rishi Sunak release his Spring Statement whereby he announced a 5p reduction in fuel rates and an increased threshold in paying national insurance.
The fuel duty tax cut came into effect from 6 pm on Wednesday (23 March 2022) and will stay in place until next March, a welcome announcement for many amidst the rise in fuel prices.
The plan to increase the threshold at which people start paying national insurance contributions by £3,000 to £12,570 comes in place from July of this year.
The Chancellor has also promised to cut the basic rate of income tax from 20p in the pound to 19 in 2024 – “a £5 billion tax cut for over 30 million people”.
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