The Bank of England's base interest rate is now 5% and the bank signalled support for further rises. It is the highest level in 15 years as the Bank of England battles to stamp out inflation. It comes on the back of the UK's official inflation rate failed to fall as expected in May, staying at 8.7% - well above the bank's 2% target.
The bad news is that the market is fairly convinced that there’s more inflation in the pipeline, so rates will have to go significantly higher and stay there for longer. The market appears to have priced for the Bank of England interest rate to peak at nearly 6% in March 2024.
Is Brexit to blame? UK has western Europe's highest rate of food inflation and it is the world's third largest net importer of food and drink. The UK also is highly reliant on imported gas to generate electricity, exposing it to the full force of the surge in gas prices last year. The end of free movement of workers from EU countries has contributed to a shortage of staff faced by many employers which has pushed up wages and ultimately prices for consumers and hence, continued higher inflation.