What will the latest rate hike mean for the UK economy?

The Bank of England's rate hikes are at last beginning to have noticeable effect on the UK economy. Jeremy Batstone assesses the impact of the latest rise on house prices, consumer spending and corporate Britain.

Bovvered? Well yes actually! The UK economy has, so far, performed pretty well but the latest hike in domestic base rates, by a further 0.25% points to 5.75%, whilst clearly aimed at keeping the lid on inflation, is almost certainly going to have an impact on the real economy in due course.

The 5th July decision had been widely telegraphed in advance and perhaps for as long as the previous monthly decision at which the governor voted with the minority (5:4) for an early increase. Although obviously not affecting the outcome (he votes last apparently) his move was clearly designed to signal his own desire for another base rate hike sooner rather than later over the now familiar concerns regarding capacity constraints, corporate pricing power and money supply growth. Although the result of the vote will not be known until the minutes of this latest meeting are released it seems pretty clear to us that when the governor votes with the minority he always maintains an unreservedly hawkish stance on the basis, one assumes, that the Bank's credibility might be undermined were this position to be maintained over a number of months.

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