Bank of England raises key rate to highest level in 13 years

LONDON

As policymakers around the globe battle inflation caused by high energy prices and Russia’s war with Ukraine, the Bank of England increased its key interest rate to their highest level in 13 year.

As U.K. inflation is at its highest level in 30 years, the central bank raised rates for the fourth consecutive time. Its Monetary Policy Committee voted 3-3 to raise the rate the Bank of England pays to other banks to 1%. Three members of the minority wanted it to go even higher, by half a point to 1.255%. saidThis is a sign of increasing momentum for aggressive action to combat rising consumer prices

“Global inflationary pressures are increasing sharply after Russia’s invasion Ukraine,” the bank said. This has caused a material decline in the outlook for U.K. and world growth,” the bank stated. said.

It saidThese developments, along with COVID-19 limitations in China, have only exacerbated the supply chain shocks the United Kingdom and other nations are currently facing.

This decision comes just a day after U.S. Federal Reserve intensified its attacks on inflation. It approved the largest rate increase in over two decades and indicated that more are coming. The Fed raised its key short-term interest rate by half a percentage point to 0.75% to 1.

Similar action has been taken by central banks from all over the world, including Australia to Sweden.

Rising consumer prices in the U.K. have created a cost of living crisis. These include skyrocketing energy bills, surging food prices, and rising transport and food prices. The Bank of England has been struggling to show that it is serious in reducing inflation, without becoming so aggressive as to undermine consumer confidence.

“The Bank of England faces a challenging task — inflationary pressures are increasing from external factors,” Dmitri Thodosiu (head of foreign exchange and interest rate trading at Investec), stated. saidNote to investors. “And with the cries and screams of ‘higher than higher’ ringing in our ears, we know that too much intervention could cause a disastrous fall to the economy.”

According to the latest economic outlook, Bank of England policymakers stated that they could see more rate increases in the future.

“Most members on the committee believe that some degree more tightening of monetary policy may still make sense in the coming months,” according to the report of the bank. said.

The British inflation rate rose to 7% in March, a record high for the country. This is more than three times higher than the central bank’s target at 2%. Economists predict that inflation will reach 9% or higher later in the year.