👛£350 income support as price cap rises £693

ECONOMY
£350 income support as price cap rises £693

What’s going on?
Yesterday Ofgem, the energy regulator, confirmed that the price cap on energy bills for households would rise by £693 from April to £1,971 a year a 54% increase. On the same day the chancellor announced that millions of households would receive loans and rebates worth £350 to help with bills.

Why is this important?

But many have criticised the fact that households will still have to bare the brunt of the bill rises and will be forced to pay back £200/£350 of the support.
 

ECONOMY
Back-to-back interest rate hikes for the first time since 2004

Last December the Bank of England nudged up interest rates from historic lows of 0.1% to 0.25%. Yesterday, at its first meeting of 2022 the Bank decided to up rates to 0.5% -  the first time it’s done consecutive increases in 18 years. 

The increase was expected as UK inflation has been running at 5.4% - the highest rate since 1992. The Bank predicts that prices will keep rising for the next few months, peaking at 7.25% by April and averaging at 6% for the year – well above the 2% target rate. It hopes that raising borrowing costs will be enough to cool the demand for goods and hence their prices

Alongside the rate news the Bank delivered a gloomy outlook for household finances this year. It cautioned that inflation and higher borrowing costs would see disposable income fall by 2% this year, the most since records began in 1990.

An environment of rising interest rates is typically reserved for putting the brakes on economies that are growing quickly. This isn’t exactly the case for the UK right now as it emerges out of Covid related restrictions, the Bank cut the forecast for economic growth from 5% to 3.75%. But the Bank believes that without the rate hikes inflation will spiral out of control which could have even more damaging impacts for households and businesses.