The Bank of England on Thursday announced a 0.25 percentage point increase in its base interest rate to 1 percent after annual inflation in the UK hit a 30-year high of 7 percent in March. Inflation is expected to peak at around 10 percent in the fourth quarter.
The rate hike is the fourth since the old lady from Threadneedle Street began tightening monetary policy to slow rising prices without causing too much pain in the UK economy. But that might be too big a task as the bank expects growth to slow sharply in the first half of the forecast period on higher prices, particularly for energy.
“GDP is expected to fall [the fourth quarter]which is mainly due to the decline in real household incomes, including income resulting from the projected increase of about 40 [percent] in retail gas and electricity prices when … price caps are next reset in October,” it noted in its report. “Calendar year GDP growth is broadly flat in 2023.”
In his press ExplanationThe Monetary Policy Committee noted that a majority of 6-3 voted to raise the reference rate by 0.25 percentage point to 1 percent, while the remaining three sought a more restrictive adjustment of 0.5 percentage point.
Inflation fears have gripped central bankers across the western hemisphere. The US Federal Reserve took a more aggressive stance than the BoE on Wednesday, announcing the largest rate hike in over two decades.
Market watchers will now turn their attention to the European Central Bank, which has yet to raise interest rates. Its Governing Council will next meet on June 9th.
This warning has been updated.
https://www.politico.eu/article/boe-keeps-tightening-amid-rising-prices-lifts-key-rate-by-25-basis-points/?utm_source=RSS_Feed&utm_medium=RSS&utm_campaign=RSS_Syndication Bank of England hikes interest rates again as inflation soars - POLITICO