To help inflation return to 2% target, this month Bank of England has raised interest rates to 4%, APA-Economics reports citing Bank of England.
Higher interest rates make it more expensive for people to borrow money and encourage them to save. That means that, overall, they will tend to spend less. If people on the whole spend less on goods and services, prices will tend to rise more slowly. That lowers the rate of inflation.
In total, since December 2021, the interest rate was raised from 0.1% to 4%.
That means that many people will face higher borrowing costs. Around one in three households in the UK have a mortgage. But high inflation that lasts for a long time makes things worse for everyone, says Bank of England.