Bank of England Raises Key Rate by 0.25% to 1%
2022.05.05 14:41
By Geoffrey Smith
Investing.com — The Bank of England raised its key refinancing rate by a relatively restrained 25 basis points to 1.0% on Thursday, a fourth straight increase that takes U.K. interest rates to their highest in 13 years, just as the U.K. economy shows clear signs of slowing down.
The Bank warned that that the U.K. economy is likely to slip into recession in the autumn, but that it nonetheless needed to tighten monetary policy to bring down inflation, which is running at a 30-year high of 7.0%. The Bank warned that inflation is likely to peak at over 10% in the fourth quarter of this year, due largely to a 40% rise in many households’ energy bills.
Despite the Bank’s own assessment that the economy will weaken sharply as real incomes come under pressure, three of its nine-strong Monetary Policy Committee voted to hike by 50 basis points, rather than just 25. Moreover, it signalled further rate rises ahead, saying that “most members of the Committee judge that some degree of further tightening in monetary policy may still be appropriate in the coming months.”
The pound nonetheless weakened on the news, falling to just over $1.2450 in the minutes after the announcement.
