The British economy is coping well with higher interest rates, the Bank of England says

The British economy is coping well with higher interest rates, the Bank of England says

The British economy has proven resilient to interest rate rises over the past year and a half, but it will take time for the full impact of the hikes to be felt, the Bank of England said on Wednesday.

Last month, the bank raised interest rates to 5%, up from 0.1% at the end of 2021, raising concerns about a severe impact on families, businesses and the financial sector in general that could push the economy into recession.

But in a semi-annual assessment of the health of the financial system, the British central bank said there was no cause for concern.

“The UK economy and financial system have so far resisted interest rate risks,” Bank of England Governor Andrew Bailey said at a press conference.

“We will continue to monitor credit conditions for any signs of tightening that cannot be satisfactorily explained by changes in the macroeconomic outlook.”

The proportion of indebted households has been growing, but even taking into account the increase in the cost of living – with inflation reaching 8.9% in May – it is likely to remain below the peak in 2007.

He said that British banks were less exposed than households to the negative effects of rising interest rates, especially compared to financial institutions in other countries, while the corporate sector remained “largely resilient.”

“However, higher financing costs are likely to put pressure on some small or highly leveraged companies,” he added.

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