Bank of England cautions on delayed impact of higher rates on weak economy

The Bank of England has warned that despite household finances performing better than expected, the impact of higher borrowing costs on the economy has yet to fully materialize. The central bank's Financial Stability Report highlighted the challenging risk environment due to a sluggish domestic economy, global growth risks, inflation, and geopolitical tensions. While borrowers and the financial system have been resilient so far, the full effect of higher interest rates is yet to be felt, posing ongoing challenges to households, businesses, and governments. Household finances remain stretched by increased living costs and higher interest rates, and corporate borrowers, particularly smaller or highly leveraged firms, are likely to face pressure from higher financing costs.