Bank of England raises interest rates again as war impacts economy – POLITICO

LONDON – The Bank of England is raising its key interest rate from 0.5 percent to 0.75 percent as persistently rising inflation exacerbated by Russia’s invasion of Ukraine, it said. announced Thursday.

The Monetary Policy Committee voted 8-1 for the increase, with Financial Stability Deputy Governor Jon Cunliffe favoring a steady hold.

Inflationary pressures, already high, are mounting due to the war, as prices of key commodities – from food to gas, oil to metals – spike. In contrast, this trend is affecting economic growth and living standards in countries that depend on imports of raw materials such as the UK, the Bank said in its monetary policy report.

The effects of Russia’s invasion of Ukraine are likely to highlight both the peak of inflation and the negative impact on activity by increasing pressure on household incomes, the bank warned. family,” the bank warned. “It also has the potential to exacerbate global supply chain disruptions and significantly increase uncertainty around the economic outlook.”

Meanwhile, UK gross domestic product is expected to “decelerate its decline throughout the year”, while inflation will stay at 8% by the end of June “and possibly even higher by the end of the year”. now,” according to the report. That compares with 5.5 percent in January.

The bank said individuals will feel a “materially larger” impact on overall earnings than a roughly 2% drop forecast in February.

“The economy has recently suffered a series of very large shocks,” said the Bank, recalling the COVID-19 crisis, to which the UK has recovered well, especially for the labor market. related. “The Russian invasion of Ukraine was another shock,” it concluded.

The bank also condemned the Russian invasion and the suffering caused to Ukraine and said it was working closely with the UK government “to support its response in coordination with international authorities”. economy,” the report said.

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