Connect with us


The Bank of England raises interest rates 0.5 percent



The Bank of England raises interest rates 0.5 percent

UK rate-setters hold back from matching global peers’ more aggressive increases but hint at the large rise in November

As central banks around the world seek to control inflation, the Bank of England raised interest rates by 0.5 percentage points on Thursday.

The rise, to 2.25 percent, the UK’s highest level since 2008, came as central banks around the world tightened policy in the wake of a third successive 0.75 percentage point rate increase by the US Federal Reserve.

Switzerland and South Africa raised interest rates by 0.75 percentage points, Norway increased by 0.5 percentage points and Japan intervened to strengthen the yen for the first time in 24 years.

The BoE’s move was smaller than markets had expected and the sterling later cut its gains on the day against the US dollar, at around $1.13; it is still trading near its weakest level since 1985 against the US currency.

Central banks around world are rapidly increasing interest rates

Central banks like the Bank of England around the world are rapidly increasing interest rates as they seek to fight the worst bout of inflation for decades, with the Fed leading the charge.

But the majority of the BoE’s Monetary Policy Committee resisted pressure to match the pace set by the Fed, reflecting worries about the state of the British economy.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that decision provided “reassurance that it is focused on the outlook for consumer price inflation and evidence of emerging slack in the economy, rather than with arbitrarily keeping up with the Joneses”.

The BoE said it now expected UK gross domestic product to fall 0.1 percent in the third quarter of the year, compared with August’s forecast of 0.4 percent growth.

This would mark a second consecutive quarter of decline, cementing fears that the economy is falling into recession.

It also suggested it would wait until November, when it updates its forecasts, to take a firmer view of the new UK government’s fiscal policy, which will be unveiled in a mini-budget on Friday.

Central bank seeks to rein in inflation

Even as the central bank seeks to rein in inflation, Kwasi Kwarteng, the new chancellor, is set to try and jump-start the economy with debt-financed tax cuts and an emergency plan to hold down energy bills.

The MPC said that “should the outlook suggest more persistent inflationary pressures, including from stronger demand, the committee would respond forcefully, as necessary”.

Economists said this left the BoE’s path open to offset the tax cuts’ impact with a large rate increase at the November meeting.

“In short, the Bank has indicated it will raise rates further to offset some of the boosts to demand from the government’s fiscal plans,” said Paul Dales, chief UK economist at Capital Economics.

MPC said the government’s energy price guarantee

The MPC said the government’s energy price guarantee would lower inflation in the short term, with CPI now likely to peak at just under 11 percent in October, earlier than expected — in contrast with previous private-sector forecasts of levels of around 15 percent next year.

But it said inflation would hover around 10 percent for several months, not necessarily low enough to dampen expectations of big price rises.

Many of our members think that the peak will come next year and so may price accordingly, running the risk that inflationary expectations become self-fulfilling, said Kitty Ussher, chief economist at the Institute of Directors.

In its deliberations on Thursday, the committee split three ways, with the majority — including BoE governor Andrew Bailey and chief economist Huw Pill — voting for the 0.5 percentage point move.

Related CTN News:

Vladimir Putin Russian President Announced A “Partial Mobilization” Of The Armed Forces

Continue Reading

CTN News App

CTN News App

Recent News


compras monedas fc 24

Volunteering at Soi Dog

Find a Job

Jooble jobs