Bank of England approves the biggest interest rate hike in 30 years

The Bank of England (BoE, in its acronym in English) has raised its basic interest rate by 0.75% this Thursday, to place it at 3%.

This is the largest increase agreed in more than thirty years (since 1989) by the British monetary institution, but it is in line with the forecasts of the markets and financial analysts.

In their latest monetary policy decisions, the European Central Bank (ECB) and the US Federal Reserve (the Fed) also raised their official rates by 0.75 basis points.

Of course, there are differences in the level of one and the other: while in Europe the official price of money is 2%, in the US it is already in a range between 3.75% and 4%.

Much more relevant than the rise are the words that have accompanied the decision this Thursday, in the statement of the Monetary Policy Committee of the BoE: "Most of the members of the committee estimate that, if the economy evolves in general in accordance with According to our projections, new increases in the interest rate may be necessary to achieve a sustained return to the inflation target, but even to peaks lower than those marked in financial market prices”, says the text.

Inflation in the United Kingdom stands at 10.1%, and the BoE assures in its statement that the pressure on prices will persist for a while.

However, the arrival in Downing Street of the new prime minister, Rishi Sunak, and the reversal of the historic tax cut announced by her predecessor, Liz Truss, have brought a certain calm and stability to the markets.

If at first the forecasts of the analysts pointed to interest rates close to 6% for 2023, the consensus of the experts suggests today that the rises will continue until they approach 5%.

Despite this, the BoE recalls that the economic context is "very challenging", in which inflation will reach its peak in the last 40 years, around 11%.

At the same time, he believes that the British economy has already entered a recession that could last for two years, longer than the 2008 crisis affected the United Kingdom.

The decision, expected by most analysts, has not been unanimous.

Two members of the BoE's Monetary Policy Committee have supported increases lower than the one finally approved, arguing that the economy would already be in recession.

However, the majority of the committee, made up of nine experts, have preferred to send a more forceful message in the fight against inflation, recalling that rates may have to rise to 5.2%, in accordance with the forecasts of the body to have the desired effect.