Bank of England accelerates rate hike

■ The Bank of England is expected to raise interest rates further, but there is a risk of higher rates due to the fiscal burden of government support.

 Just three months have passed since a series of events to celebrate the 70th anniversary of the late Queen Elizabeth on the throne. According to reports, she is in poor health due to her advanced age. On the 6th of this month, a video showed that the new leader of the ruling Conservative Party, Truss, was appointed as the new prime minister. The Queen passed away on the 8th, and the sudden bad news was surprising. The Bank of England (BOE) announced that the Monetary Policy Committee (MPC) on the 15th will be postponed to the 22nd. Economic indicators will be released as scheduled.

 The unemployment rate was 3.6% in May-July, the lowest level since 1974, but employment rose by 40,000 month-on-month, slowing for two consecutive months. The drop in the unemployment rate is thought to be due to a decline in the labor force. In addition, average hourly wages (excluding bonuses, 3-month average) increased by 5.2% year-on-year, while real wages continued to decline by 3.9% year-on-year. On the other hand, the consumer price index (CPI) rose 9.9% year-on-year in August, slowing from a 40-year high of 10.1% in the previous month, due to the fall in fuel prices. The Bank of England's Monetary Policy Report (MPR) released in August forecasts that the CPI will peak at 13.3% in October. With the CPI exceeding the central bank's target (2%), market speculation is that the Bank of England will raise interest rates to 75 basis points at the Monetary Policy Committee meeting on the 22nd, raising the policy rate from 1.75% to 2.50%.

 On the 8th, the new Prime Minister Truss announced a plan to curb utility costs within two years. From October 1, electricity and gas bills for the average household will be capped at £2,500 a year as the cost of living rises due to a sharp rise in energy prices. Peel, the Bank of England's chief economist, said the move was expected to slow inflation in the short term, but said the impact on monetary policy remained uncertain. The finance minister is expected to spell out the costs associated with the aid package in a fiscal report later this month. According to reports, the fiscal burden has reached 150 billion pounds, and the expansion of the fiscal deficit brings the risk of rising interest rates.