Interest rates, which in the UK are 5.25%, have risen to higher-than-expected levels and the geopolitical environment has worsened, particularly in the Middle East, according to the Financial Policy Committee.
The Committee refers to the commercial real estate sector, Especially in China, where vulnerabilities are already noted, as well as the high level of public debt in major economies..
In the UK, the accumulated debt of the British public sector, excluding public banks, amounted to £2.65 billion (€3.10 billion) at the end of February, or 97.1% of the country’s GDP.
Meanwhile, the committee sees the outlook for British households as having improved slightly since the end of last year, although they remain under pressure from rising living costs and higher interest rates.
However, she sees higher wages as helping to boost household finances in the UK, although around 45% of UK mortgage holders are still under pressure from rising living costs and interest rates.
In this regard, the MPC highlights that the UK banking sector is strong enough to support households and businesses, even if economic conditions worsen significantly.
The Bank of England is keeping interest rates high as a means of controlling inflation, which fell to 3.4% in the 12 months to February, compared with 4% in January this year.The bank expects inflation to fall slightly below the 2% target in the second quarter of 2024.
