Bank of England Raises Interest Rates to 0.25% to Tackle Inflation
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
The Bank of England has raised interest rates from 0.1% to 0.25%.
This is the first time that the bank has increased rates since 2018 as it moves to bear down on inflation which has reached 5.1%.
Monetary policy committee members voted by an overwhelming majority to up rates, as the bank risked falling behind the curve in responding to elevated inflation.
With the omicron variant spreading rapidly across the UK, the central bank said it was “unclear at this stage” what the impact on economic activity would be. Nevertheless it said that the economy was strong enough to weather rising interest rates and the effect it would have in taking some demand out of the economy.
Bank of England MPC votes 8-1 to hike interest rates, ECB leaves rates unchanged
The MPC voted by 8 to 1 to raise rates. Bank policymakers say they expect inflation to reach as high as 6% by the second quarter of 2022.
Inflation is notoriously difficult to rein back if it becomes embedded in an economy because a spiral of self-reinforcing price and cost rises can set in, with wages being bid up to keep abreast of the cost of living.
The pound has surged in response to the rate hike. GBP/USD jumped 0.7% to 1.3355.
The BoE’s move comes in start contrast to the European Central Bank, which shortly after the British central bank’s announcement said that it is leaving interest rates unchanged for now, despite inflation in the eurozone of 4.1%.
