The Bank of England raised interest rates yesterday in an attempt to stem rapidly accelerating inflation, but with households already facing a major hit from soaring energy bills, it has slowed down. mitigating its language of increased need.
t after the US Federal Reserve raised rates there on Wednesday.
In London, eight out of nine members of the Monetary Policy Committee (MPC) voted to raise the Bank Rate from 0.5 points to 0.75pc, the third increase in many meetings and bring the return to pre-pandemic levels.
The US Federal Reserve’s rate hike is the first time it has done so since the Covid-19 pandemic, and it sets out an aggressive tightening path.
BoE Deputy Governor Jon Cunliffe was the sole proponent of leaving rates unchanged, warning of a big hit to demand from higher commodity prices. Economists polled by Reuters had expected a unanimous vote.
The BoE said inflation was set to hit around 8pc in April – nearly a percentage point more than last month’s forecast and four times its 2pc target – and warned it could peak higher at the end of the year.
Soaring energy bills, made even higher by the conflict in Ukraine, mean that the UK’s household budget squeeze could be much bigger than the BoE predicted last month – which itself It has been considered the largest in 30 years.
Reflecting these concerns about the growth outlook, policymakers yesterday pushed back investors’ bets that the bank rate would surge to around 2pc by the end of the year, softening its language of extra demand.
“The Committee assesses that some more modest tightening may be appropriate in the coming months, but there are risks on both sides of that assessment depending on how the medium-term outlook develops. ,” said the BoE.
Last month, the MPC said a modest further tightening “may be appropriate”.
The pound fell nearly a cent against the dollar and UK government bond prices soared as investors cut bets that the BoE would raise interest rates quickly this year. “The MPC is clearly taking steps to combat rising inflation. But they will go tight in the coming months,” said economist Alpesh Paleja of the Federation of British Industry.
Samuel Tombs, an economist at Pantheon Macroeconomics, said an end to BoE rate hikes was in sight. “Today’s minutes give us more confidence that the rate hike cycle will stall after the committee raises the bank rate to 1pc, most likely at its next meeting in May,” he said. ,” he said.
While the assessment of inflation expectations is stabilizing right now, a majority of the committee said they raised rates to reduce the risk that recent trends in wage and price growth will turn into expectations.
Businesses surveyed by the BoE expect wage increases by 4pc-6pc this year, compared with 2.5pc-3.5pc in 2021.
The BoE said Russia’s invasion of Ukraine is likely to significantly increase global inflationary pressures in the coming months and add to supply chain disruptions.
https://www.independent.ie/business/world/uk-interest-rates-rise-for-third-time-as-inflation-soars-41459471.html UK interest rates rise for third time as inflation soars