The Bank of England (BoE) raised its key rate on Thursday to 3.5%, a high since October 2008, despite a British economy that is on the way to a recession.
However, it slowed the pace of monetary tightening, just like the US central bank (Fed) the day before.
The BoE's Monetary Policy Committee (MPC) voted for "
an increase in the key rate of 0.5 percentage points
", the British institution said in a press release, less than the level of 0.75 points of the month previous one, even if "
further increases may be necessary
", according to her.
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On Wednesday, the US Federal Reserve (Fed) also fell from an increase of 0.75 points to 0.5 points, and the European Central Bank (ECB) could do the same later Thursday.
“
While economic activity is undoubtedly weakening, there are signs that it is more resilient than expected and it is unclear how quickly the labor market will
ease,” the BoE notes in the minutes of its meeting.
Read alsoThe ECB will further restrict access to easy money
It now forecasts a 0.1% contraction in UK GDP in the fourth quarter, slightly less than the 0.3% contraction that was expected in November.
But it does not amend its forecast of a long recession which would have already started.
And inflation, if it fell to 10.7% in November, remains at a peak in nearly 40 years, fueling a crisis in the cost of living in the country where strikes are multiplying.
"
The latest MPC projections suggest that one-year inflation peaked
" in October, BoE Governor Andrew Bailey said in a letter to the finance minister, a mandatory exercise when inflation moves away from more than one percentage point from the 2% target.
Protecting the economy while fighting inflation
The rise in prices is, however, “
increasingly driven by local factors.
The labor market, in particular, is very tight
,” he adds, predicting a lasting drop in inflation only from spring 2023. A sign of the difficulty for the MPC to spare the economy while fighting the inflation, of its nine members, two defended keeping rates at their November level and another a more marked increase of 0.75 percentage points.
The BoE has also started selling the long-term bonds it had bought at the end of September and in October, after the surge in the State borrowing rate in the wake of ultra-costly budget announcements by the government of Liz Truss.
“
As of December 13, approximately 40% of the government bonds purchased in these operations have been sold
,” details the BoE.
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