Businesses and households in Britain are dealing with rising interest rates, but the adjustment process is far from over and banks also need to prepare to make changes in the way they get funds, the Bank of England said.
The BoE noted that overall risks remain challenging with China's economic woes, the risk of wider conflict in the Middle East, and high levels of public debt.
At the same time, the Governor of the BoE also stated "It is likely that the rate will need to remain at this level for a long period of time to bring inflation back to the target continuously,".
“The full impact of higher interest rates is yet to be achieved. Therefore, we remain alert to financial risks that may arise.”
The BoE noted that stronger-than-expected wage and income growth since the survey in July had eased some of the pressure on households hit by high inflation, tax rises, and higher borrowing costs.
"However, household finances remain strained due to rising living costs and higher interest rates," the BoE's Monetary Policy Committee reported.
The UK central bank also expressed concern over the lingering effects of last year's surge in inflation, raising interest rates in 14 consecutive meetings between December 2021 and August this year to 5.25%.
BoE officials acknowledged signs of a slowdown in the economy but emphasized that they did not yet intend to cut rates because of signs of inflationary pressures that would remain strong.
However, British financial markets have raised expectations of an initial rate cut by the BoE in the past few days, following similar changes in expectations for the European Central Bank and the US Federal Reserve, and now see the first quarterly rate cut in May or June. next year.
