Interest rates in the UK have been at a record low of nought 0.1% since March 2020, a figure which helps house buyers but hinders savers.
With homes and businesses continuing to juggle stretched finances, there has been little appetite to consider an interest rate rise, until now.
Spiralling inflation has led the Bank of England (BoE) governor, Andrew Bailey, to issue a warning that action will be needed sooner rather than later to stop the economy from overheating.
Experts have been predicting an interest rate rise before the end of 2021 for some time, so this news doesn't come as a huge surprise. But will the anticipated rise occur in November, or will the BoE governor and the Monetary Policy Committee hold their nerve for a little longer?
Although many signs indicate that the Bank of England is edging in next inexorably closer to a rate rise, not everyone agrees that it's inevitable to happen soon or that it will be permanent.
The UK Economy still has a long way to recover from the recent global events, and there are concerns about how a rate rise could affect FTSE 100 listed companies.
The Chief Economist for the BoE , Huw Pill, Has conceded that the decision of whether to increase interest rates is much more “two-sided” than it has been before. With the need to support the economy while on while it recovers balanced against rising inflation, tough decisions must be made.
Although there is no escaping the fact that inflation is much higher than the BoE are comfortable with, hiking up interest rates may not be the right decision just yet. Over half of city analysts believe that interest rates will be kept the same in the short term before gradually starting to rise.
The flipside of this is that just under half of analysts believe an almost immediate interest rate rise will be a pre-emptive measure to intercept inflation before it climbs too high.
Bank of England Statement
The subject of interest rates and inflation is often under the spotlight, but the Bank of England Governor has stepped into the debate ostensibly to set expectations for a rate rise.
Addressing a G30 meeting, Andrew Bailey did nothing to dampen down expectations of interest rates rising, warning that inflationary pressure was making it important for the Bank to act.
Bailey has spoken in the past of his belief that the rising inflation is only a temporary issue and one that will subside. However, he has now acknowledged that the energy crisis and rising costs in the sector have impacted inflation, causing prices to rise higher - and for longer.
Only a month ago there was a widespread belief that the inevitable interest rate rise wouldn't come in before the summer of 2022. Still, Bailey’s latest comments Have caused an about turn in opinion.
after rocketing to 3.2% in August, inflation has lowered very slightly to 3.0% in September, but it's still expected to reach 4.0% by the end of the year. For a Bank whose target is inflation of 2.0% or less, it may mean that there is no choice but to act now.