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Image of the Bank of England.
The Monetary Policy Committee of the Bank of England has decided to raise the reference interest rate for its operations by 25 basis points, which will stand at 1%, its highest level since 2009, as announced by the institution, which has raised the price of money for the fourth consecutive meeting and anticipates further increases in the coming months.
Based on their updated assessment of the economic outlook, most Committee members believe that some degree of further monetary policy tightening may still be appropriate in the coming months.
The money price hike was adopted by a majority of six votes in favor of the 0.25 point hike against three who preferred a 50 basis point rate hike.
The decision of the English supervisor to raise interest rates for the fourth consecutive time comes a day after the United States Federal Reserve has accelerated its own normalization cycle with a rise of 50 basis points, to a target range of between 0.75% and 1%.
In its analysis, the institution has taken into account that global inflationary pressures have intensified considerably after the Russian invasion of Ukraine and the situation of the covid-19 pandemic in China, causing a material deterioration in the outlook for global growth and the UK and exacerbating the effect of supply
shocks
as well as concerns about supply chain disruption.
Last March, the UK's year-on-year inflation rate rose to 7% from 6.2% in February, its highest reading in 30 years, and is set to rise further in the coming months, to around 9 % in the second quarter of 2022 and averaging a little over 10% at its peak, expected during the fourth quarter of 2022. However, the institution is confident that, thanks to the actions of monetary policy, inflation expectations in the long term are anchored in the 2% target and that the upward pressure on inflation dissipates over time.
Turning to economic developments, the Bank of England expects UK GDP growth to slow sharply during the first half of the forecast period reflecting the adverse impact on real household incomes and profit margins. companies from sharp increases in world prices for energy and tradable goods.
