After years of being anchored close to zero, the Bank of England has raised the UK base interest rate for the second time in two months by 0.5 percentage points to 2.25 per cent on Thursday
In August, the rate rose from 1.25 per cent to 1.75 per cent, the largest increase in nearly three decades. With expectations of a three quarters of a per cent rise the pound gave up its gains following the announcement on Thursday to trade below the $1.13 threshold.
The Bank of England said it would continue to “respond forcefully, as necessary” to inflation, despite the economy entering recession.
The central bank estimates Britain's economy will shrink 0.1 per cent in the third quarter — partly due to the extra public holiday for Queen Elizabeth's funeral — which, combined with a fall in output in the second quarter, meets the definition of a technical recession.
Economists polled had forecast a repeat of August's half-point increase in rates, but financial markets had bet on a three-quarter-point rise.
It is the highest interest rate that the UK has had since the financial crisis. In December 2008 the base rate was slashed from 3 per cent to 2 per cent.
Here, The National shows five charts that the bank believes justify its monetary intervention.
1. Debt
The government's gross debt currently stands at £2,365.4 billion ($2,698.7bn), equal to 99.6 per cent of gross domestic product — an increase of £195.2 billion year-on-year. With the current inflation rate already raising the cost of borrowing, further unplanned borrowing will add more pressure.
The Institute for Fiscal Studies has warned the Government was putting the public finances on an “unsustainable path” with borrowing set to hit £100 billion a year even after the energy support package has ended – more than double the official forecasts last March.
The prospect of persistent deficits in the current budget and debt rising as a share of national income meant, it said, both the main fiscal targets set in January will have been missed.
2. Inflation
The decision to raise interest rates is a bid to keep inflation under control. It is the best tool that the Bank of England has to steer inflation — currently at 9.9 per cent — back to its 2 per cent target.
Higher interest rates mean rising borrowing costs for everyone, including the government. The seventh interest rate increase in a row will also have a major impact on people’s finances, not least those with mortgages who will need to start paying more for their home loans.
3. G7 comparison
UK inflation is the highest in the Group of Seven economies and Alice Haine of BestInvest said the outlook for prices is to remain high, given the international factors at play “Inflation may have come in lower than expected in the 12 months to August at 9.9 per cent, down from 10.1 per cent in July, but it is still alarmingly high as the cost-of-living crisis fuelled by global challenges, namely Putin’s war with Ukraine, rumbles on," she said.
"As a result, the BoE still expects inflation to peak at just under 11 per cent in October despite Truss’ energy plan, as the resulting boost to economic activity from the two-year freeze on energy bills and Chancellor Kwasi Kwarteng’s swathe of tax cuts set to be unveiled in the mini-budget on Friday could see inflation stay higher for longer.
4. GDP
The central bank had previously projected the economy would grow in the current financial quarter but said it now believes Gross Domestic Product (GDP) will fall 0.1 per cent.
The would follow after a reported 0.2 per cent fall in GDP in the second quarter and would mean the economy is currently in recession.
A technical recession is when the economy shrinks for two quarters in a row.
5. Moribund pound
Sterling has been weak against the dollar for months, largely because of the strength of the US currency.
The euro has also been at multi-decade lows against the dollar.
UAE currency: the story behind the money in your pockets
Tips to stay safe during hot weather
- Stay hydrated: Drink plenty of fluids, especially water. Avoid alcohol and caffeine, which can increase dehydration.
- Seek cool environments: Use air conditioning, fans, or visit community spaces with climate control.
- Limit outdoor activities: Avoid strenuous activity during peak heat. If outside, seek shade and wear a wide-brimmed hat.
- Dress appropriately: Wear lightweight, loose and light-coloured clothing to facilitate heat loss.
- Check on vulnerable people: Regularly check in on elderly neighbours, young children and those with health conditions.
- Home adaptations: Use blinds or curtains to block sunlight, avoid using ovens or stoves, and ventilate living spaces during cooler hours.
- Recognise heat illness: Learn the signs of heat exhaustion and heat stroke (dizziness, confusion, rapid pulse, nausea), and seek medical attention if symptoms occur.
Founder: Ayman Badawi
Date started: Test product September 2016, paid launch January 2017
Based: Dubai, UAE
Sector: Software
Size: Seven employees
Funding: $170,000 in angel investment
Funders: friends
What drives subscription retailing?
Once the domain of newspaper home deliveries, subscription model retailing has combined with e-commerce to permeate myriad products and services.
The concept has grown tremendously around the world and is forecast to thrive further, according to UnivDatos Market Insights’ report on recent and predicted trends in the sector.
The global subscription e-commerce market was valued at $13.2 billion (Dh48.5bn) in 2018. It is forecast to touch $478.2bn in 2025, and include the entertainment, fitness, food, cosmetics, baby care and fashion sectors.
The report says subscription-based services currently constitute “a small trend within e-commerce”. The US hosts almost 70 per cent of recurring plan firms, including leaders Dollar Shave Club, Hello Fresh and Netflix. Walmart and Sephora are among longer established retailers entering the space.
UnivDatos cites younger and affluent urbanites as prime subscription targets, with women currently the largest share of end-users.
That’s expected to remain unchanged until 2025, when women will represent a $246.6bn market share, owing to increasing numbers of start-ups targeting women.
Personal care and beauty occupy the largest chunk of the worldwide subscription e-commerce market, with changing lifestyles, work schedules, customisation and convenience among the chief future drivers.
Killing of Qassem Suleimani
If you go
Flying
Despite the extreme distance, flying to Fairbanks is relatively simple, requiring just one transfer in Seattle, which can be reached directly from Dubai with Emirates for Dh6,800 return.
Touring
Gondwana Ecotours’ seven-day Polar Bear Adventure starts in Fairbanks in central Alaska before visiting Kaktovik and Utqiarvik on the North Slope. Polar bear viewing is highly likely in Kaktovik, with up to five two-hour boat tours included. Prices start from Dh11,500 per person, with all local flights, meals and accommodation included; gondwanaecotours.com
World Cup warm-up fixtures
Friday, May 24:
- Pakistan v Afghanistan (Bristol)
- Sri Lanka v South Africa (Cardiff)
Saturday, May 25
- England v Australia (Southampton)
- India v New Zealand (The Oval, London)
Sunday, May 26
- South Africa v West Indies (Bristol)
- Pakistan v Bangladesh (Cardiff)
Monday, May 27
- Australia v Sri Lanka (Southampton)
- England v Afghanistan (The Oval, London)
Tuesday, May 28
- West Indies v New Zealand (Bristol)
- Bangladesh v India (Cardiff)
UAE currency: the story behind the money in your pockets
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
CREW
%3Cp%3E%3Cstrong%3EDirector%3A%20%3C%2Fstrong%3ERajesh%20A%20Krishnan%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStarring%3A%20%3C%2Fstrong%3ETabu%2C%20Kareena%20Kapoor%20Khan%2C%20Kriti%20Sanon%26nbsp%3B%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%203.5%2F5%3C%2Fp%3E%0A
Results
2pm: Al Sahel Contracting Company – Maiden (PA) Dh50,000 (Dirt) 1,200m; Winner: AF Mutakafel, Tadhg O’Shea (jockey), Ernst Oertel (trainer)
2.30pm: Dubai Real Estate Centre – Maiden (TB) Dh60,000 (D) 1,200m; Winner: El Baareq, Antonio Fresu, Rashed Bouresly
3pm: Shadwell – Rated Conditions (TB) Dh100,000 (D) 1,950m; Winner: Lost Eden, Andrea Atzeni, Doug Watson
3.30pm: Keeneland – Handicap (TB) Dh84,000 (D) 1,000m; Winner: Alkaraama, Dane O’Neill, Musabah Al Muhairi
4pm: Keeneland – Handicap (TB) Dh76,000 (D) 1,800m; Winner: Lady Snazz, Saif Al Balushi, Bhupat Seemar
4.30pm: Hive – Conditions (TB) Dh100,000 (D) 1,600m; Winner: Down On Da Bayou, Royston Ffrench, Salem bin Ghadayer
5pm: Dubai Real Estate Centre – (TB) Handicap Dh64,000 (D) 1,600m; Winner: Lahmoom, Royston Ffrench, Salem bin Ghadayer
THE BIO
Favourite holiday destination: Whenever I have any free time I always go back to see my family in Caltra, Galway, it’s the only place I can properly relax.
Favourite film: The Way, starring Martin Sheen. It’s about the Camino de Santiago walk from France to Spain.
Personal motto: If something’s meant for you it won’t pass you by.
BUNDESLIGA FIXTURES
Friday (all kick-offs UAE time)
Hertha Berlin v Union Berlin (10.30pm)
Saturday
Freiburg v Werder Bremen (5.30pm)
Paderborn v Hoffenheim (5.30pm)
Wolfsburg v Borussia Dortmund (5.30pm)
Borussia Monchengladbach v Bayer Leverkusen (5.30pm)
Bayern Munich v Eintracht Frankfurt (5.30pm)
Sunday
Schalke v Augsburg (3.30pm)
Mainz v RB Leipzig (5.30pm)
Cologne v Fortuna Dusseldorf (8pm)
UK-EU trade at a glance
EU fishing vessels guaranteed access to UK waters for 12 years
Co-operation on security initiatives and procurement of defence products
Youth experience scheme to work, study or volunteer in UK and EU countries
Smoother border management with use of e-gates
Cutting red tape on import and export of food
