Interest rates may go up to 4 per cent

BORROWERS will be hit by another painful interest rate hike this week – but it could mark the beginning of the end for the Bank of England’s aggressive inflation fighting moves.

The Bank is widely expected to increase its benchmark interest rate by half a percentage point to 4 per cent.

Such an increase would add £77 a month to a typical standard variable rate mortgage repayment, according to Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.

There are signs that inflation, currently more than 10 per cent, is starting to ease.

Markets are expecting further rises to come in increments of 0.25 percentage points.

Interest rates are predicted to peak at 4.5 per cent over the summer.

Deutsche Bank’s chief UK economist, Sanjay Raja, said the Bank’s updated forecasts were likely to show a ‘dramatically improved economic outlook’ as they should take into account easing energy prices.