Bank of England follows suit with the Fed - Raises Interest Rates
The Monetary Policy Committee approved the 25BPS increase and took the interest rate to a base of 1%...
Today, the Bank of England has raised its interest rates to the highest level in 13 years as they too attempt to beat down inflation. In a move that was expected, policymakers and the bank voted for a hike, which is the fourth consecutive since December.
The Monetary Policy Committee approved the 25BPS increase and took the interest rate to a base of 1%. Members of the bank claim that the minority would have liked instead to follow the footsteps of the United States Fed and increase rates by 0.5 percentage points.
Inflation within the United Kingdown hit 7% in March, marking a 30-year high and three times the target level. Consumer confidence on the other hand sank to a near record low.
Inflation is expected to run up to nearly 10% this year and the Bank has warned people are likely to witness inflation rise faster than income. Sterling hit a low of 1.2393 against the USD today as well.
“Global inflationary pressures have intensified sharply following Russia’s invasion of Ukraine. This has led to a material deterioration in the outlook for world and UK growth.”
The Monetary Policy Committee said in a statement.
Governor Andrew Bailey says that the country is walking on a very narrow path at this point. “The proximate reason for raising [the] bank rate at this point is not only the current profile of inflation and what is to come and of course what that could mean for inflation expectations to come - but the risks as well,” he added.
As mentioned, the Central Bank of the United States raised its interest rate to a range between 0.75% and 1%. This is the Fed’s largest hike in nearly two decades and the most aggressive step toward fighting inflation.
The Bank also sees inflation reaching its peak of 10.2% throughout the United Kingdom, the highest level since 1982.
“UK GDP growth is expected to slow sharply over the first half of the forecast period. That predominantly reflects the significant adverse impact of the sharp rises in global energy and tradable goods prices on most UK households’ real incomes and many UK companies’ profit margins.”
The Bank said.