A peak in UK interest rates wouldn't solve our economic woes

IT hasn't happened much recently, but yesterday the Bank of England delivered some good news. This was felt instantly in the financial markets, with the FTSE 100 rising by 0.8% and ending the day close to its highest level since before the pandemic. And eventually it will be felt by households too.

- Paul Dales

I'm not talking about the rise in interest rates from 3.50% to 4.00%. When it comes to interest rates, the Bank has had a very busy 14 months. It has raised them 10 times since December 2021 to a 14-year high. That cumulative rise from 0.10% to 4.00% is the fastest and largest since the late 1980s.

That makes sense given that the rise in inflation has been the fastest and largest since the early 1980s. At 10.5% in December, CPI inflation was only a touch below October's peak of 11.1% and was still more than five times the Bank's 2.0% target.

Instead, the good news was that the Bank indicated that it doesn't think it will raise interest rates much further. In fact, there is even a possibility that interest rates have reached their peak. If so, then the dictionary definition of "peak" indicates that the next move will be down. So does this signal the end to the painful period in which the rises in prices for food, fuel and heating have been accompanied by rising mortgage and credit card payments?