Bank Of England Tightens Screws On Monetary Policy

After the US Federal Reserve and the European Central Bank decisively increased their interest rates on Thursday, the Bank of England followed along and pushed its rate by 50 basis points to 1.75 percent annually. The indicator increased significantly for the first time in 27 years. In this manner, the regulator is attempting to slow the rate of inflation growth, which, based on a recent forecast, will grow to 13.1% in the fourth quarter.

The Bank of England anticipates that the British economy will start to contract in the fourth quarter of this year, and that the recession would persist through 2023. As a result, the rate was raised.

The benchmark interest rate set by the Bank of England increased by 50 points all at once on Thursday, going from 1.25 percent per year to 1.75 percent. The rate has already reached its highest point since December 2008, when it was 2%, and it is the biggest increase since 1995.

Against the backdrop of rising gas costs, the UK’s annual inflation rate already reached 9.4% in June. Andrew Bailey, governor of the Bank of England, stated two weeks earlier that the regulator would « act decisively ».

The central bank pushed up both the rate and its inflation projection on August 4; the latter forecasts that the rate will rise by 3 percentage points (p.) to 13.1% in the fourth quarter of 2022 from the level it set in its May forecast. Price growth is anticipated to drop down even further in 2023, reaching 5.5 percent. The Bank of England’s estimate involves the assumption that as global commodity prices stabilize, inflationary pressures would gradually weaken.


You might also like

Leave a Comment